Celanese Q1 2025 Earnings Report

Celanese EPS Results

• Actual EPS: $0.57
• Consensus EPS: $0.37
• Beat/Miss: Beat by +$0.20
• One Year Ago EPS: $2.08

Celanese Revenue Results

• Actual Revenue: $2.39 billion
• Expected Revenue: $2.26 billion
• Beat/Miss: Beat by +$128.74 million
• YoY Revenue Growth: -8.50%

Celanese Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 9:00AM ET

Celanese (NYSE:CE), a chemical and specialty materials company, manufactures and sells high performance engineered polymers in the United States and internationally. It operates through Engineered Materials and Acetyl Chain. The Engineered Materials segment develops, produces, and supplies specialty polymers for automotive and medical applications, as well as for use in industrial products and consumer electronics. The Acetyl Chain segment produces and supplies acetyl products, including acetic acid, vinyl acetate monomers, acetic anhydride, and acetate esters that are used as starting materials for colorants, paints, adhesives, coatings, and pharmaceuticals; and organic solvents and intermediates for pharmaceutical, agricultural, and chemical products. It also offers vinyl acetate-based emulsions for use in paints and coatings, adhesives, construction, glass fiber, textiles, and paper applications; and ethylene vinyl acetate resins and compounds, as well as low-density polyethylene for use in flexible packaging films, lamination film products, hot melt adhesives, automotive parts, and carpeting applications. In addition, it provides redispersible powders (RDP) for use in construction applications, including flooring, plasters, insulation, tiling, and waterproofing. Celanese Corporation was founded in 1918 and is headquartered in Irving, Texas.

Celanese Q1 2025 Earnings Call Transcript

Key Takeaways

• First quarter impacts from turnarounds (~$30 million) and U.S. tariffs (~$30 million) are expected to be more than offset by roughly $100 million in H2 2025 tailwinds from cost actions (~$60 million) and dividends/volume (~$50 million), provided demand remains stable.
• The Engineered Materials segment saw Q1 volumes down 4% but order books strengthened in March and April, while acetyl chain volumes were down 6% with an unusual seasonal pickup only in acetate tow (up 25% in Q2 vs Q1).
• Celanese has launched the sale of Micromax as part of a broader portfolio divestiture strategy to boost cash generation and is exploring multiple additional transactions this year.
• The Nylon 66 business remains challenged by global overcapacity and soft demand, prompting Celanese to implement price increases, cost reductions and capacity rationalization to stabilize margins.
• Management targets $700 million–$800 million of free cash flow in 2025, driven by working capital releases, maintenance CapEx, lower cash taxes and operational levers to support accelerated debt reduction.

Presentation

[Operator]

Greetings. Welcome to the Celanese First Quarter twenty twenty five Earnings Call and Webcast. At this time, all participants are in a listen only mode. Please note this conference is being recorded. I will now turn the conference over to your host, Bill Cunningham.

[Operator]

Thank you. You may begin.

[Bill Cunningham, Vice President of Investor Relations at Celanese]

Thanks, Daryl. Welcome to the Celanese Corporation first quarter twenty twenty five earnings conference call. My name is Bill Cunningham, Vice President of Investor Relations. With me today on the call are Scott Richardson, President and Chief Executive Officer and Chuck Kyrish, Chief Financial Officer. Celanese distributed its first quarter earnings release via Business Wire and posted prepared comments as well as a presentation on our Investor Relations website yesterday afternoon.

[Bill Cunningham, Vice President of Investor Relations at Celanese]

As a reminder, we'll discuss non GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward looking statements. Please review the cautionary language regarding forward looking statements, which can be found at the end of both the press release and the prepared comments. Form eight ks reports containing all of these materials have also been submitted to the SEC.

[Bill Cunningham, Vice President of Investor Relations at Celanese]

With that, Daryl, let's please go ahead and open it up for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. Our first questions come from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.

[David Begleiter, Director at Deutsche Bank]

Thank you. Good morning. Scott, nice quarter. Looking beyond Q2, how should we think about the earnings cadence, if not ramp in the back half of the year?

[Scott Richardson, President & CEO at Celanese]

Thank you, David. Look, we do have some tailwinds, particularly on the cost side as we go into the second half of the year. First half is pretty heavy on turnarounds. There's probably around $30,000,000 of tailwind there. We called out tariff impact of about $30,000,000 on a direct basis.

[Scott Richardson, President & CEO at Celanese]

So those two offset each other. The additional cost reduction actions that we outlined in the prepared remarks is about $40,000,000 And then kind of the full run rate of the original $80,000,000 is another 20,000,000 So you got about 60,000,000 there. And then tow dividend and tow volume will certainly be a tailwind as well. Those two together are about $50,000,000 or so in the second half. So when you kind of put those things together, it's really a nice kind of almost $100,000,000 or so just from those elements in the second half.

[Scott Richardson, President & CEO at Celanese]

The uncertainty factor demand right now. And I think that is what we're watching very closely to see kind of where things are going to hold from a demand perspective.

[David Begleiter, Director at Deutsche Bank]

Very good. And just on Micromax, is this the only divestiture you're looking at this year or could it be more this year beyond just Micromax?

[Scott Richardson, President & CEO at Celanese]

We've been very consistent that our focus is on cash generation. And we are looking at a myriad of options on the divestiture side, David. It's not just Micromax. We've talked about having a portfolio of things that we're looking at. We felt like announcing the Micromax transaction was important because of the number of inbounds that we've had on this business and with us launching the process right now.

[Scott Richardson, President & CEO at Celanese]

We felt like being public with it made a lot more sense. Thank you.

[Operator]

Thank you. Our next questions come from the line of Frank Mitsch with Fermium Research. Please proceed with your questions.

[Frank Mitsch, President at Fermium Research]

Just following up on MicroMax. How do we think about the EBITDA margins for that business?

[Scott Richardson, President & CEO at Celanese]

Thank you, Frank. Yes, we said the revenue is about $300,000,000 And honestly, right now, that business is running very similar EBITDA margins to what Engineered Materials did in the first quarter. So high teens, Frank, is how I would think about it.

[Frank Mitsch, President at Fermium Research]

All right. Terrific. And I appreciate the color in the commentary and in the slides regarding Nylon sixty six and the difficulties therein. I mean, have seen a recent bankruptcy filing. What's your outlook in terms of capacity rationalization and what gets that business fundamentally improving?

[Scott Richardson, President & CEO at Celanese]

I'd like to take a quick step back, Frank. I mean, we believe that we have the leading engineered materials franchise in the world. When you look at the 19 different polymer families that we have in our portfolio, we feel like we can really deliver unique customer solutions to a wide variety of the customer base. Nylon is the one that's specifically challenged. And so we called it out really because it is a business that we know we've got to put a core amount of focus on and has been the biggest driver of our earnings decline in the last several years.

[Scott Richardson, President & CEO at Celanese]

As we look here, the industry is challenged. The industry has given up a lot of margin over the last several years and it's unsustainable. And so the actions that we started taking last year around capacity reductions, us kind of flexing a different operating model here hasn't been enough yet. But we are starting to see a stabilization here. And now that we've got things stabilizing, it's important that we start to build up.

[Scott Richardson, President & CEO at Celanese]

And so you've seen us announce some price increases. We're continuing to focus heavily on the cost side of the equation so that we can really streamline our operations to be leaner and ability to meet customer needs going forward.

[Frank Mitsch, President at Fermium Research]

Understood. Just lastly, you called out that you didn't expect the high cost producers to be able to last in this sort of environment. Are you seeing any tangible actions that of competitor capacity rationalizations?

[Scott Richardson, President & CEO at Celanese]

Frank, we can only can control what we do. And we, I believe, have been taking decisive actions in this business and we will continue to do so. And we'll continue to partner with our customers as well to bring unique solutions and continue to drive our costs down as much as we can.

[David Begleiter, Director at Deutsche Bank]

Got you. Thanks so much.

[Operator]

Thank you. Our next questions come from the line of Jeff Zekauskas with JPMorgan. Please proceed with your questions.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Thanks very much. Oil prices have begun to come down. Is this good for Celanese or bad for Celanese or how do you think about it or calculate it?

[Scott Richardson, President & CEO at Celanese]

Thank you, Jeff. We have a flexible operating model. We have a variety feedstocks. And I think we've been pretty consistent over the years that we're relatively agnostic to where oil pricing is at. And so we haven't necessarily we see some puts and takes from that.

[Scott Richardson, President & CEO at Celanese]

We certainly see some feedstock reductions, which is helpful. But then you see some offsets from that, particularly in things like the Ibn Sina dividend, which comes down when oil pricing moves off. So as we've run a myriad of permutations from a straight cost perspective, we tend to be agnostic. The question is really demand. I think in most economic environments, lower oil pricing usually means demand is at reduced levels in a lot of our end uses.

[Scott Richardson, President & CEO at Celanese]

And so I think that's the piece that we're watching closely right now.

[Jeffrey Zekauskas, Analyst at JP Morgan]

So in the quarter, Engineered Materials volumes were down four and year over year and the acetyl chain volumes were down six. Is that sort of the baseline level of year over year change that you expect? When you did your guide for the second quarter, many of the positive components you pointed to were either one time or cost related. Are you seeing sort of a normal seasonal pickup in volumes? Can you talk about what you expect for volumes for the year?

[Scott Richardson, President & CEO at Celanese]

Yes. I'll talk about order book as well, Jeff, here for the second Let me start with Engineered Materials. We saw a much stronger March than we saw in January and February. And the April orders were kind of in line with that March pickup. And the order book for May looks very similar.

[Scott Richardson, President & CEO at Celanese]

June is too early to say, and there's some uncertainty around where June orders will go. But April and May are strong. So we are seeing a volume pickup from Q1 into Q2 from Engineered Materials. The Acetyl side of things, I would say we're not seeing the normal seasonal pickup that we would typically see. Usually Q2 is significantly better volumetrically and things like paints and coatings.

[Scott Richardson, President & CEO at Celanese]

We haven't seen that. We're seeing some of that, but not nearly at the level that we've historically in the past. Where we are seeing volumes move up in acetyls is in the acetate tow business. And we called out some Q1 seasonality there and things certainly are better here as we've started the second quarter. Just as an example, April volumes in acetate tow were about 25% more than January volume.

[Scott Richardson, President & CEO at Celanese]

So certainly seeing things move in the right direction there.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Thank you.

[Operator]

Thank you. Our next questions come from the line of Ghansham Panjabi with Baird. Please proceed with your questions.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Thank you, operator. Good morning, everybody. I just want to go back to the Nylon 66 question earlier. Obviously, very significant drag on operating profit since 2021 on the EM segment. Scott, what specifically changed relative to perhaps your diligence at the time of the M and M transaction prior to close?

[Ghansham Panjabi, Senior Research Analyst at Baird]

And then what is the catalyst to change the profitability metrics for that business going forward? Is it just demand weakness at this point and exaggerated supply? What's going on there?

[Scott Richardson, President & CEO at Celanese]

Thank you, Ghansham. The biggest change that we saw happen as we got into 'twenty two and 'twenty three was really reduced demand. And I think that was really came at the exact same time of the increase in capacity. I mean, the increased capacity coming to the marketplace was something that we had seen and we knew was coming. But I think that overlay of the demand reduction coming at that second time has just created this significant overcapacity in a short period of time.

[Scott Richardson, President & CEO at Celanese]

And we just didn't see a rationalization globally of capacity very quickly. And we took action obviously over a year ago on our asset in Europe. And you'll have to see kind of where things go as we go forward. But historically, the Western Hemisphere was over capacitized, but it had a home to go in China. And when China brought on a lot more new capacity, we've seen that volume back up.

[Scott Richardson, President & CEO at Celanese]

And so we'll just have to kind of see where things go from a balance perspective. But we're going to continue to pivot there. We as we've said in the past, we don't need to be a producer of nylon polymer. We are buying polymer as well. And when it's cheaper to do so, we'll ramp down our own operating rates.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Okay. Thanks for that. And then in terms of the upstream AC segment, pricing has been negative since 4Q twenty twenty two on a year over year basis pretty consistently. Just trying to reconcile your comments in your prepared commentary, etcetera. Are we sort of at an inflection point as you see it at this point?

[Ghansham Panjabi, Senior Research Analyst at Baird]

I know you've done some pricing in different businesses.

[Scott Richardson, President & CEO at Celanese]

Yes. The overcapacity that we've seen is contained in Asia today. And we have been moving our business model consistently over the last five or so years further downstream. And we've added capacity in our emulsions business. We purchased the powders asset downstream from emulsions, and that has given us more flex really to consume more acetic acid and VAM internally.

[Scott Richardson, President & CEO at Celanese]

Currently, on a global basis, 65% of what we actually sell in acetyls to a third party customer is not acetic acid or VAM. And so that downstream capability does give us some level of differentiation. It doesn't fully insulate us from overcapacity and we certainly would like margins to be better in acetic acid and VAM, but it does give us some flexibility there. And margins have been relatively stable in the Western Hemisphere.

[Ghansham Panjabi, Senior Research Analyst at Baird]

Okay. Terrific. Thank you, Scott.

[Operator]

Thank you. Our next questions come from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions.

[Vincent Andrews, Managing Director at Morgan Stanley]

Thanks and good morning. Just on the seven hundred to eight hundred million dollars of cash you're calling out for the year. I mean, understanding that the back half of the year is tricky right now to forecast from an earnings perspective. But can you just bridge us 24,000,000 to $25,000,000 I know there were lot of onetime items on the cash flow statement last year, but just sort of help us understand your conviction and being able to get to 700 to $800,000,000 of cash this year despite a tricky outlook?

[Scott Richardson, President & CEO at Celanese]

Yes. Vincent, let me start and then I'll let Chuck fill in some of the year over year details. As I said earlier, our focus is on cash. And yes, there's uncertainty in the back half. We do have some tailwinds second half versus first half, as I called out earlier.

[Scott Richardson, President & CEO at Celanese]

But there is some uncertainty with demand. We are not even though volumes are better here in the second quarter, we are not ramping up our plant rates. We are focused on reducing inventory and are going to pull back on rates if we see any kind of reduction in demand. So that inventory reduction plan is very strong. And we have levers, we believe, even if we see a sharp reduction in demand in the second half, we have levers to be able to generate cash flow in the range we called out.

[Chuck Kyrish, Senior VP & CFO at Celanese]

Yes, that's right, Vincent. And to guide on free cash flow, some of those levers, they will have impact on the income statement, right, in terms of cost absorption, etcetera. So those are more difficult to predict sort of on a timing basis. But what we are confident in is the cash flow protection and generation of these levers. And we also think about the categories that we've been talking about to call out of year over year improvement.

[Chuck Kyrish, Senior VP & CFO at Celanese]

Working capital is a use of cash last year. We're expecting it to be a source of cash this year. So that's a significant increase year over year. We've really taken CapEx down to our maintenance levels. And so that's going to be a significant increase.

[Chuck Kyrish, Senior VP & CFO at Celanese]

Cash taxes will come down. So those things, in addition to these levers that Scott talked about make us confident in that 700 to $800,000,000 of free cash flow for the year.

[Vincent Andrews, Managing Director at Morgan Stanley]

Okay, very good. And then if I could, as a follow-up, your auto volumes, your volumes into auto were down 5% against a global industry down 10%. How much of that outperformance was just a function of it seems like it was Asia where the real weakness was? And I think Asia has been a softer market for you in recent quarters versus are you also picking share up or any other things you want to call out in that delta?

[Scott Richardson, President & CEO at Celanese]

Look, our team has balance and where we're positioned globally on automotive. Obviously, business historically is stronger in the Western Hemisphere than in China, but that China business is growing. The end of some of the European destocking that we had called out in the month of March and as we started here Q2 was a good driver for us. Certainly, that's where we have more content is in The U. S.

[Scott Richardson, President & CEO at Celanese]

And in Europe. And so that certainly was helpful. And we had seen kind of a mismatch of our volumes versus where builds were in the fourth quarter. And so this is kind of getting things kind of balanced back out, Vincent.

[Vincent Andrews, Managing Director at Morgan Stanley]

Thanks very much.

[Operator]

Thank you. Our next questions come from the line of Josh Spector with UBS. Please proceed with your questions.

[Joshua Spector, Executive Director at UBS Group]

Yes. Hi, good morning.

[Joshua Spector, Executive Director at UBS Group]

Scott, I

[Joshua Spector, Executive Director at UBS Group]

wanted to ask your view on the impact of tariffs on your ability to flex your acetyls chain. So I mean you called out kind of $15,000,000 net headwinds a quarter in second half. I'm not sure how much of that's acetyls versus the other businesses. But the hallmark of that business model has been the flexibility and ability to arb different regions. So how much of a hindrance is that?

[Joshua Spector, Executive Director at UBS Group]

Or do you see that something you could largely mitigate?

[Scott Richardson, President & CEO at Celanese]

Tariffs really don't have much impact for us in acetyls, Josh. I mean the amounts that we called out are really more related to Engineered Materials. Yes, a hallmark of our model is ability to flex. But even when we first started investing in China in 02/2007, we've talked about China for China for the most part in acetyls. And so we have a really nice position with where our assets are positioned in acetyls, and we really don't see much tariff impact.

[Joshua Spector, Executive Director at UBS Group]

Okay. So maybe to clarify for me, on Slide 17, when you talk about 9% of China sales essentially coming from The U. S, is that all EM then or what's the nature of that material?

[Scott Richardson, President & CEO at Celanese]

Yes, it is all Engineered Materials, Josh. And it is really specifically just several product families. And as we called out there, we have the ability to move that production to other places for about half of that exposure. So we do have a gap, and the team is working hard still on that remaining gap to find ways to mitigate it going forward.

[Joshua Spector, Executive Director at UBS Group]

Thank you.

[Operator]

Thank you. Our next question has come from the line of Patrick Cunningham with Citi. Please proceed with your questions.

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

Hi, good morning. I was wondering if you could speak to the success of pricing actions across the EM portfolio given the 1Q and 2Q price increases you've announced. It looks like price is modestly higher sequentially, but could you compare and contrast standard grade versus the more differentiated end and outlook for pricing for the year?

[Scott Richardson, President & CEO at Celanese]

Yes. Thank you, Patrick. The team was successful getting some price. We didn't get a whole lot in the first quarter because those price increases were announced towards the end of the quarter, but we did see some. And we are seeing a little bit of that carry forward obviously and some additional increases here in the second quarter.

[Scott Richardson, President & CEO at Celanese]

I think the price you're seeing is a little more mix related in the first quarter. That was a bigger chunk of the pricing.

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

Very good. And then just on the high impact growth pipeline in EM, do you have any concerns on resource alignment, customer relationships with quite a bit of headcount reduction in this business? How do you balance the right levels of SG and

[Scott Richardson, President & CEO at Celanese]

A investment to support this pipeline going forward? We are taking an aggressive approach on the cost structure of not just the business, but the entire corporation. But we also believe that we have sufficient resources. And it is really about making sure that we are majoring in the majors, not majoring in the minors here, and that we are making sure our resources are focused on those high impact programs. And it doesn't mean we're not going to work other things.

[Scott Richardson, President & CEO at Celanese]

It just means that where we're going to put real effort and where we're going to make investment is on those things that have a bigger payoff. And I think the Engineered Materials team led by Todd Elliott has really been doing a great job of ensuring that we are looking at everything that we're doing and making sure our resources are properly positioned on those high impact areas.

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

Very good, thank you.

[Operator]

Thank you. Our next questions come from the line of Mike Sison with Wells Fargo. Please proceed with your questions.

[Michael Sison, Managing Director at Wells Fargo Securities]

Hey, good morning guys. A nice start to the year. When we think about the second half of the year, Scott, I think you're assuming things don't get worse from here. Where do you think you should end the year in terms of, I don't know, maybe earnings power? Where would you like to get the company to in terms of, in this environment, some level of earnings or EBITDA as we exit the year heading into hopefully a better year next year?

[Scott Richardson, President & CEO at Celanese]

Well, Mike, let me just kind of take a step back. We're not assuming anything right now. We are continuing to be diligent on driving self help actions, and that is where our focus is. You look at some of those second half tailwinds that I talked about, if and this is obviously a big if, were to stay similar to what it is in April and May, then if you add those things, you would get to kind of a run rate exiting the year around $2 a share. That's obviously a big if.

[Scott Richardson, President & CEO at Celanese]

And we're not going to assume that that's going to be the case. And we're going to continue to be ahead of how we operate our assets to ensure that we are generating cash because that is really the key focus for us right now, Mike.

[Michael Sison, Managing Director at Wells Fargo Securities]

Got it. And then longer term, as reassess the portfolio, do you have any thoughts since you've taken the helm of where the earnings power for Celanese should be longer term?

[Scott Richardson, President & CEO at Celanese]

We have two great franchises with strong operating models. We believe in the acetyl chain operating model. We believe in the engineered materials operating model. These businesses have significant earnings power. I mean the steps that we're taking now and the things that we're doing to generate opportunities even in an uncertain environment, I think are going to be a nice catalyst for us when we see a stabilization of demand.

[Scott Richardson, President & CEO at Celanese]

I mean if you look at our largest end use exposure in the ASCIL chain and paints, coatings, construction, adhesives, it's been really historically soft now for multiple years. And the business is still generating the type of EBITDA that it is. That flexibility that we have in that business and the investments we've made will really well position that to grow earnings pretty significantly going forward. And I'm not ready to call out a number right now, Mike, on the future, but we do believe kind of the first step is kind of that $2 per quarter, and then we'll build off of that.

[Michael Sison, Managing Director at Wells Fargo Securities]

Great. Thank you.

[Operator]

Thank you. Our next questions come from the line of Alexey Yefremov with KeyBanc Capital Markets. Please proceed with your questions.

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Thanks. Good morning, everyone. Scott, last quarter you talked about your focus on gaining share in content in Asia. I mean, we're now five months into this year. How do you feel about your progress on this topic this year?

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

And maybe if look into 'twenty six, how should this area of focus evolve for you?

[Scott Richardson, President & CEO at Celanese]

China is an important area of focus for us. We believe that in automotive, in particular, that the local OEMs are going to be the winners there in China, and we need to be increasing our content there. That increased content is really going to be focused on these high impact programs that we have. It needs to be margin focused because I don't know that the volume play there is going to be the same as where our business has historically developed. And so the team is really quarterly focused.

[Scott Richardson, President & CEO at Celanese]

Todd Elliott and team have created really a focused group that is really designed around accelerating our content there locally in China. We grew our EV volumes in China Twenty Percent last year over the previous year, and we've got to do that again this year. And so that's the kind of focus and targets that we're setting for ourselves to ensure that we're successful long term.

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

And just looking back on Engineered Materials last year, as you know, you were just shy of $1,300,000,000 of EBITDA. It sounds like destocking is over, demand is okay. How realistic is it for you to get back to that 1.3 annual level over the next few quarters? And what are the risks? What has changed that may preclude you from going back to that level of earnings?

[Scott Richardson, President & CEO at Celanese]

Well, first and foremost, it's around self help actions, the things that we are driving that we control. And that is the first step here. And I think with the team, it continues to create a nice slate of actions, and it seems like we're adding to that list every single quarter. And so that is helpful. The volume side of the equation is important.

[Scott Richardson, President & CEO at Celanese]

Every incremental ton that we sell is worth a lot, particularly as we continue to pull cost out of this business. And so getting some level of volume stability coming out of where we were in the fourth quarter and the first part of Q1 was extremely important. I also think that the price discussion is important. Margins have compressed here pretty significantly in some of these standard grade areas. And it is really important that we get off of these unsustainable margin levels.

[Scott Richardson, President & CEO at Celanese]

And so that's another element. And we know that's not going to change overnight, and we're going to have to keep working up that step by step. But we feel confident in the long term earnings power of this franchise.

[Operator]

Thank you. Our next question has come from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your questions.

[Kevin McCarthy, Partner at Vertical Research Partners]

Yes, thank you and good morning. Scott, when I look at your 2025 free cash flow range of 700,000,000 to 800,000,000 and back out your ranges for CapEx, working capital, cash taxes, etcetera, It seems to imply that you're tracking to an adjusted EBITDA level around $1,800,000,000 or so. Is that fair or are there other cash flow items that might skew the implied earnings range materially higher or lower than that?

[Scott Richardson, President & CEO at Celanese]

No, Kevin, I wouldn't read too much into that. As we've stated repeatedly, our focus is on cash. And given the amount of potential demand uncertainty that we see in the back half of the year, we're not we're kind of looking at a myriad of scenarios of how things could play out. And with the levers that we have to pull in the variety of those scenarios, we believe that is a solid range for us, and we're confident in that range. Like I said before, if given some of the tailwinds that we have in the second half, if demand were to stay pretty stable, then certainly the earnings trajectory will look pretty strong in the second half of the year.

[Kevin McCarthy, Partner at Vertical Research Partners]

Okay, fair enough. And then secondly, in a scenario where the tariff regime is status quo today, can

[Kevin McCarthy, Partner at Vertical Research Partners]

you just talk

[Kevin McCarthy, Partner at Vertical Research Partners]

in general terms about what you think might happen in China? For example,

[Kevin McCarthy, Partner at Vertical Research Partners]

have

[Kevin McCarthy, Partner at Vertical Research Partners]

you seen or would you expect to see any examples of project cancellations in China as you look across your portfolio? And where do you think the effect on market conditions could be most pronounced?

[Scott Richardson, President & CEO at Celanese]

We haven't seen project cancellations in China. What I would say, Kevin, is we are seeing orders in some of the, I would say, kind of small appliances, toys, those areas, we've seen that kind of start to pull back here in the second quarter. That tends to be relatively low margin business for us. So we're not significantly worried about it from an EBITDA perspective. But I do think it's indicative of the uncertainty that is out there.

[Kevin McCarthy, Partner at Vertical Research Partners]

Thanks very much.

[Operator]

Thank you. Our next questions come from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your questions.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

I guess I had a question on EM first. You noted that the earnings power of the business has deteriorated maybe $350,000,000 on a gross profit basis and 75% of that was nylon. I know you addressed some of the nylon challenges, but would you say that many of the actions you're taking would allow you to recover that $350,000,000 of gross profit loss and maybe even grow above that? Or is that kind of structurally deteriorated earnings power? How do you think about that?

[Scott Richardson, President & CEO at Celanese]

Arun, in my opinion, the bold actions that we're taking are adding to the long term earnings power of the business. So we talked about gross profit being down $350,000,000 or so. Our SG and A, R and D costs have also gone down by 250,000,000 So you've got that partial offset there. I think that power and our ability to operate leaner at lower cost is going to help us going forward as we continue to drive opportunities through our high impact programs as we stabilize and then start to increase the returns in our standard grade nylon business and continue to work projects in our historical EM product lines in the standard grades where we have seen some compression as well. And the actions that we're taking on pricing are important here because we need to get off of these unsustainable levels in the standard grade part of the portfolio.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Okay. Thanks for that. And just a question on the leverage. So it sounds like, obviously, you're laser focused on cash generation and reducing your leverage. Is there any kind of roadmaps and milestones we should keep in mind as far as where you will maybe get to four times or 4.5 times?

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

And if there's any kind of liquidity challenges on a covenant basis that we should be aware of? Thanks.

[Chuck Kyrish, Senior VP & CFO at Celanese]

Hey, Arun. No, I don't see any liquidity challenges. It's all about generating cash through free cash flow and divestitures and paying down debt as quickly as we can. The ultimate leverage is going to depend largely also on EBITDA and levels there, but nothing has changed about our focus on driving this balance sheet to a much lower leverage levels.

[Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets]

Thanks.

[Operator]

Thank you. Our next questions come from the line of Hassan Ahmed with Alembic Global. Please proceed with your questions.

[Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors]

Good morning, Scott. You mentioned a few times about via self help and if demand does not materially deteriorate from current levels to get to a $2 a quarter EPS run rate by year end. If I'm running my numbers correctly, that would kind of imply, and correct me if I'm wrong, on an annualized basis around $1,300,000,000 or so in free cash flow generation. And then on top of that, you guys sound pretty confident in over the next two point five years, an incremental sort of cash injection of, call it, dollars 1,000,000,000 to $2,500,000,000 via divestitures. So I mean, I thinking about these things correctly?

[Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors]

I mean, because that would place you guys even barring any sort of material recovery in a pretty good situation in terms of debt pay downs?

[Scott Richardson, President & CEO at Celanese]

Arun, I don't believe we've been fully recognized for the cash generation.

[Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors]

Scott, from the other side of the border, it's Hassan.

[Scott Richardson, President & CEO at Celanese]

Hassan,

[Scott Richardson, President & CEO at Celanese]

my apologies. Look, I don't think we've been fully recognized for our cash generation capabilities here. We last year, we had lower cash flow, but we called out a lot of one time items that would have added $400 to $500,000,000 to that. When you look at the additional actions that we're taking and pulling cost out, certainly, cash flow over $1,000,000,000 if you're operating at those EBITDA levels is certainly in the right range. And so we feel good about our ability to continue to generate cash going forward.

[Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors]

Understood. Understood. And again, wanted to revisit sort of the earnings power of the EM business. I mean, you guys obviously flagged the $350,000,000 in sort of deterioration between 2021 and 2024. And again, from the sounds of it, some of the actions that you guys are taking and what you guys have flagged in terms of the nylon business, sort of oversupply, demand not great.

[Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors]

I mean, sounds much more cyclical and it just seems the cost that you guys have taken out and some of the sort of business wins that you're doing, it seems you have a revised sort of earnings power for that business. And it seems it's higher than what you originally anticipated, call it, at the time of the M and M business. Am thinking about that properly? And A, that? And B, would you sort of give us some sort of a guesstimate maybe in terms of margin terms, what that sort of earnings power may look like maybe on a normalized basis?

[Scott Richardson, President & CEO at Celanese]

Look Hassan, there'd be a lot of assumptions there that we'd have to make. We need to focus on where things are right now. And we are not happy with where our current earnings levels are and we are aggressively taking actions to improve that. And I believe on the self help cost side of things, we are leaning things out to where we are going to be extremely nimble as we go forward. And we are putting the right focus around how we can generate unique opportunities to Celanese in both Engineered Materials as well as in the Acetyl chain.

[Scott Richardson, President & CEO at Celanese]

And I do think that will drive power for us going forward. The nylon business, in particular, is a business that does have a lot of standard elements to it. There are some also some really great specialty applications in this business. But those standard elements do have a lot of characteristics similar to how Acetyls operates. And so we're kind of taking some of the DNA that we have there and we're applying it to that operating model.

[Scott Richardson, President & CEO at Celanese]

And the scenario that we've seen materialize here in Nylon over the last several years is not unlike what we saw happen in the acetyl business in 02/2008, '2 thousand and '9 economic crisis, where demand fell extremely quickly and at the same time, new supply came online in China. And it took some time to work that out. I believe we have levers and actions that we can to get this business moving in the right direction going forward.

[Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors]

Very helpful, Scott. Thank you so much.

[Operator]

Thank you. Our next questions come from the line of John Roberts with Mizuho Securities.

[John Roberts, Managing Director at Mizuho Financial Group]

I'm not sure we've heard much about Electronic Inks and Pace in the past. Could you just tell us kind of what type of customers that business serves, the geographic mix? And what is it that kept it at Celanese up until this point? Is it connected to some of the other businesses?

[Scott Richardson, President & CEO at Celanese]

Thanks for the question, John. Look, we really like this business. It is a good business. It is a little bit more contained with a different set of customers than what we have in the rest of our Engineered Materials portfolio. It is not an engineered thermoplastic.

[Scott Richardson, President & CEO at Celanese]

It is not a thermoplastic elastomer. That's really the core of our operating model we have in EM. And so it sits a little bit off to the side, not unlike what we had with the Food Ingredients business a few years ago. The reason why we're just now working to sell the business is we felt like there were opportunities in this business to kind of put some of the characteristics of our operating model into the business in terms of operating with a project pipeline model and generating a pipeline of opportunities going forward. It's historically been a very stable business, but we believe now this is a business that has really nice growth prospects.

[Scott Richardson, President & CEO at Celanese]

And so with those kind of self help actions being implemented in the business, we now feel like now is the right time to market it.

[John Roberts, Managing Director at Mizuho Financial Group]

Okay. And then on the China JV dividends, what was the remedy that got the distributions restarted? Did the law change or did you make a legal change to your ownership? What happened there?

[Scott Richardson, President & CEO at Celanese]

No, John. The law change requires an audit to be completed before we can receive the dividend payments. And so that audit will need to get done in the first quarter of every year. And so the timing of those payments now are just going to be split over the last three quarters as opposed to ratably through all four quarters as in the past. So that's really the main element of what changed.

[John Roberts, Managing Director at Mizuho Financial Group]

Great. Thank you.

[Operator]

Thank you. Our next questions come from the line of Salvator Tiano with Bank of America. Please proceed with your questions.

[Salvator Tiano, Equity Research Analyst at Bank of America]

Yes. Thank you very much. Firstly, I want to go back to acetate, where you mentioned very strong demand in April, the end of destocking versus another major producer that actually recently said the opposite that the destocking is extending. And I'm wondering, given you have local production in China, do you think that this is reflecting different a change in actual end market demand? Or could the improvement you're seeing be that you're gaining market share versus imports?

[Scott Richardson, President & CEO at Celanese]

Yes. Sal, our China business is really fully contained within the joint venture. So our base Celanese business does not have exposure to Celanese beyond the dividend. And so we've been pretty open about the fact that several years ago as earnings declined pretty significantly that it made sense for us to operate our business model differently in acetate tow. We're operating it really as another derivative of acetic acid and really combined our teams and are operating it really similarly to how we operate other downstream derivatives.

[Scott Richardson, President & CEO at Celanese]

And so we contracted the business a little differently. And the contracts we have in place have a little more seasonality in them than what we had historically. And so you saw that in the fourth quarter. Volumes were stronger. We saw that corresponding decline in the first quarter, and you're seeing that bounce back now here in Q2.

[Salvator Tiano, Equity Research Analyst at Bank of America]

Perfect.

[Salvator Tiano, Equity Research Analyst at Bank of America]

And with regards to some other items from the Q2 and Q3 earnings bridge, firstly, you mentioned around 15,000,000 to $20,000,000 in improvement in vinyls in Q2 based on price and volumes. How solid is this number? And generally, when we think about the modest demand improvement you've mentioned, how does this compare to normal seasonality? And on Q3, recently yesterday, you mentioned you put a press release on June 1, price increase for many Engineered Materials products. If these go through as planned, what could be the tailwind in Q3 from pricing?

[Scott Richardson, President & CEO at Celanese]

Well, let me take your second question first. Look, I don't want to negotiate against ourselves here. So I'm not going to call out a number. We need to reverse the trend of pricing in this business. And this is another action that we are taking.

[Scott Richardson, President & CEO at Celanese]

I didn't call that out as a second half tailwind because we're not counting on it until we see it come through. And it's something though that it is a trend that needs to be reversed. Going then on to your first question around vinyls, look inventories are lean here as we get into the second quarter. There's heavy turnaround activity largely in the Western Hemisphere And pricing is still below the Asia arbitrage. And so from both a pricing and volume perspective, we feel like and are seeing opportunities here in the second half, which is why we called that out.

[Scott Richardson, President & CEO at Celanese]

Thank you very much.

[Operator]

Thank you. Our next questions come from the line of Laurence Alexander with Jefferies. Please proceed with your questions.

[Laurence Alexander, Analyst at Jefferies Financial Group]

Good morning. Just a couple of quick ones. First, with going back to the discussion about the one time versus structural improvements this year, can you give a sense for what the visible carryovers are into 2026 on both the EBITDA side and the free cash flow side? Second, very quickly on the high impact projects, is that pool of opportunities growing? Or are you just doing a better job winning kind of the targets you go after?

[Laurence Alexander, Analyst at Jefferies Financial Group]

And then just lastly, I think kind of it's easy for us on the outside to debate spreads and the direction of spreads. But if you think about a return to a strong global environment at some point in the next four or five years, if you fully flex your portfolio, how much would your earnings or EBITDA lift or your sales lift just from the uptick in volume?

[Scott Richardson, President & CEO at Celanese]

Okay. A lot to unpack there, Laurence. Let me start with kind of the 26% run rate. It's too early to speculate really on where demand is. So we can only kind of look at where we are today.

[Scott Richardson, President & CEO at Celanese]

And as I called out, if demand were to stay similar to what we see here in the second quarter with the self help actions and things that come back in the second half, we'll be on kind of that $2 trajectory is how I would see things. You will have some quarterization that will look a little different going forward than things in the past. For example, this TOW dividend, we will not have in the first quarter. So we'll have to kind of think about how that plays out, but we're also going to continue to be hopefully some of the other actions we're taking around pricing as well as things on the High Impact Program side of things will take hold. So that's how I would think about it right now.

[Scott Richardson, President & CEO at Celanese]

And as we get closer to the end of the year, we'll provide obviously a lot more color on other things that we're driving. On the high impact program side of things, I mean, this is an area where we're really getting focused around those things that we believe are going to grow at differential levels and areas where we have unique offerings and things that we bring to customers and where we believe we can win in all regions of the world. And again, this doesn't mean we're going to stop doing other things. It means that we're really going to pivot our resources and put a concerted effort around these things. And so it is an area that we believe we will grow further and faster than what we have been growing in some of these areas previously.

[Scott Richardson, President & CEO at Celanese]

And look, from a spread perspective, I don't want to speculate because it's uncertain as to where demand will go. But I think you have to really look at first on the acetyl chain side of things. I mean, we are at historical low levels of consumption, particularly in the Western Hemisphere in areas like paints, coatings, adhesives. A lot of these applications, they don't ship from Asia because you're moving 50% water. So these are applications and demand that is going to be regional in nature, and we're at very low levels there.

[Scott Richardson, President & CEO at Celanese]

And so as you see recovery there, we believe we are well positioned with our asset base to win, and you should see some margin expansion as well as volume expansion there. And the investments that we've made to expand our VAM capacities over the last six, seven years in North America as well as acetic acid expansions, we believe we're well positioned. On the Engineered Materials side of things, the costs that we're taking out and really continuing to really fully synergize this business from a cost and a network and a footprint perspective is going to allow us to ramp volumes. And we have compounding assets really now in every corner of the world. And that ability, because we don't need to be the maker of the polymer.

[Scott Richardson, President & CEO at Celanese]

So if we buy polymer and compound it, that's okay, because the pool of profit sits in that compounding step and it's the step where we can create unique customer solutions. And so that capability, when you see some demand normalization and with the success of us driving high impact program areas, particularly in areas where we've been underrepresented like China, we think the upside potential is nice going forward.

[Laurence Alexander, Analyst at Jefferies Financial Group]

Thank you.

[Bill Cunningham, Vice President of Investor Relations at Celanese]

Daryl, we'll make the next question. The last one, please.

[Operator]

Thank you. Our last questions are going to come from the line of Matthew Blair with TPH. Please proceed with your questions.

[Matthew Blair, Managing Director at TPH&Co]

Great. Thank you, and good morning. Some of the industry numbers for things like autos and durable goods were really quite strong in March and April. And there's a thought that, that was simply demand that was pulled forward due to tariff concerns. And we contrast that to some of your commentary.

[Matthew Blair, Managing Director at TPH&Co]

It sounds like demand is holding in. May order books, I think you mentioned, are pretty similar to April. So could you help us reconcile that? Are there other areas that are picking up in Q2 that are offsetting durables in autos for you? Or perhaps that original assumption just wasn't correct?

[Matthew Blair, Managing Director at TPH&Co]

Thank you.

[Scott Richardson, President & CEO at Celanese]

Yes. Thank you, Matthew. I think, look, we don't know exactly kind of what the current demand level is. Is it we don't believe it's necessarily pre buying per se. But end customers certainly were accelerating purchases in things like automotive.

[Scott Richardson, President & CEO at Celanese]

And so this could be just a rebalancing and restocking of the value chain. And it's why we talk a lot about the uncertainty of demand in the second half, because we don't know exactly where that's going to be and kind of what we're seeing right now. We also don't know exactly where June is going to be. And so we'll have a lot better line of sight as we get a few more weeks into this. But I do think I don't want to sit there and say demand is not uncertain.

[Scott Richardson, President & CEO at Celanese]

It very much is. We're not necessarily hearing that from our customers, but we also can't make the assumption that this isn't just a little bit of that rebuild of supply chain. Now what I will say though is tariff impact is still impacting automotive. We haven't really seen those tariffs weren't paused. And so that is our largest end use.

[Scott Richardson, President & CEO at Celanese]

And so there's just a lot of dynamics here that we're working to clarify here in the coming weeks and months.

[Matthew Blair, Managing Director at TPH&Co]

Great. Thanks for your comments.

[Bill Cunningham, Vice President of Investor Relations at Celanese]

Well, thank you, everyone. We'd like to thank everyone for listening in today. As always, we're available after the call for any follow-up questions. Daryl, please go ahead and close out the call.

[Operator]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. We appreciate your participation. Have a wonderful day. You may now disconnect.

Participants

Executives

• Bill Cunningham, Vice President of Investor Relations
• Scott Richardson, President & CEO
• Chuck Kyrish, Senior VP & CFO

Analysts

• David Begleiter, Director at Deutsche Bank
• Frank Mitsch, President at Fermium Research
• Jeffrey Zekauskas, Analyst at JP Morgan
• Ghansham Panjabi, Senior Research Analyst at Baird
• Vincent Andrews, Managing Director at Morgan Stanley
• Joshua Spector, Executive Director at UBS Group
• Patrick Cunningham, Vice President, Senior Analyst at Citigroup
• Michael Sison, Managing Director at Wells Fargo Securities
• Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets
• Kevin McCarthy, Partner at Vertical Research Partners
• Arun Viswanathan, Senior Equity Analyst at RBC Capital Markets
• Hassan Ahmed, Senior Equity Analyst at Alembic Global Advisors
• John Roberts, Managing Director at Mizuho Financial Group
• Salvator Tiano, Equity Research Analyst at Bank of America
• Laurence Alexander, Analyst at Jefferies Financial Group
• Matthew Blair, Managing Director at TPH&Co