Celanese Q4 2025 Earnings Call Transcript

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Provided by Quartr
February 18, 2026

Key Takeaways

  • Positive Sentiment: Debt and divestiture plan — Management is prioritizing cash generation and refinancing, targeting $1 billion of divestiture proceeds by end-2027 (about half done) and expects at least one more transaction in 2026 to help deleverage the balance sheet.
  • Positive Sentiment: Free cash flow target — Celanese reiterated a 2026 free cash flow range of $650–$750 million, citing levers such as a planned ~$100 million inventory reduction, lower cash taxes and interest, and reduced cash spend on cost programs.
  • Positive Sentiment: Engineered Materials as the growth engine — Management expects EM to deliver the most controllable EBIT growth in 2026 (driven by electronics, selected automotive segments and medical), and sees EM/cost actions as core to achieving a $1–$2 EPS uplift versus 2025.
  • Negative Sentiment: Acetyl Chain pressure — Acetyl Chain Adjusted EBIT fell ~$400 million in 2025, driven mainly by volume and price declines (notably acetate tow) and China overcapacity; management expects only modest stabilization in Asia and cautions material improvement is uncertain.
  • Negative Sentiment: Near-term timing headwinds — A ~$30 million Q1 inventory tailwind is likely to reverse in Q2 and higher scheduled turnarounds (e.g., polyacetal) make 2026 second-half weighted, implying Q2 may be flattish to Q1 and could press near-term results.
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Earnings Conference Call
Celanese Q4 2025
00:00 / 00:00

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Operator

Please note, this conference is being recorded. I will now turn the conference over to Bill Cunningham. Thank you, Bill. You may begin.

Bill Cunningham
Bill Cunningham
VP of Investor Relations at Celanese

Thanks, Daryl. Welcome to the Celanese Corporation fourth quarter 2025 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 fourth quarter earnings release via Business Wire and posted prepared comments, as well as a presentation on our Investor Relations website yesterday afternoon. 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 8-K reports containing all of these materials have also been submitted to the SEC.

Bill Cunningham
Bill Cunningham
VP 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. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before you press the star keys. We ask that you please limit yourself to one question and one follow-up question. Our first questions are coming from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.

David Begleiter
David Begleiter
Managing Director and Senior Equity Research Analyst at Deutsche Bank

Thank you. Good morning. Scott, now that the business has been stabilized and you've done some improvements on the cost and balance sheet side, what are your updated thoughts on potentially selling some equity to get out ahead of this, balance sheet issue? Thank you.

Scott Richardson
Scott Richardson
President and CEO at Celanese

David, our focus continues to be on the plan that we've been outlining. You know, it is really about cash generation first, and I think the team has done an excellent job of prioritizing cash generation and the strength of that in 2025, despite the earnings decline year-over-year, was evident. And the fact that I think we built you know, the right elements that can keep that going here in 2026 and beyond. And we're extremely well poised for recovery. So, you know, our focus really continues to be on using you know, debt. And you know, we've been able to refinance our bonds and continue to pay off what is right in front of us.

Scott Richardson
Scott Richardson
President and CEO at Celanese

You know, given the fact that our maturities now coming up over the next couple of years are significantly lower than they were, and, you know, the cash generation that we have from the business, as well as what we have coming from divestitures, we believe is strong. We feel like we're in a really good position.

David Begleiter
David Begleiter
Managing Director and Senior Equity Research Analyst at Deutsche Bank

Very clear. Just on tow, what are you seeing for pricing in your contracts for 2026?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Very little change in contract pricing, David. And you know, I would say, you know, in more the spot part of the business, that's where we've seen more competition with the you know, the additional capacity that came on in the market last year, which drove the actions that we're taking. And I think the team you know, with the action we announced last quarter about the Lanaken plant closure, you know, we're gonna be able to drive enhanced cost benefit into the business of about $20 million-$25 million on a full year basis, of which we should see about $5 million-$10 million of that this year, and we're trying to bring as much of that forward as possible.

David Begleiter
David Begleiter
Managing Director and Senior Equity Research Analyst at Deutsche Bank

Thank you.

Operator

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

Patrick Cunningham
Patrick Cunningham
VP and Senior Equity Analyst at Citi

Hi, good morning. Thanks for taking my question. I guess first, just on the sequential improvement in engineering materials, both from a volume and mix perspective, can you just parse out, you know, which end markets are starting to stabilize and, you know, unpack some of the broader macro assumptions for 2026?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, what I would say is, you know, electronics is what I would say the bright spot right now, Patrick. I'd say it's a net positive on a global basis. You know, we're seeing a global build-out from, you know, AI, as well as at data centers, and that's positive in the electronic space, but it's a small part of the overall base of the business. So, you know, certainly auto is much larger piece of the base and, you know, the business is gonna trend kind of where that goes, at least at this point. And I would say auto is more mixed. You've got, you know, some uncertainty in China with some of the EV credits and stimulus rolling off in China, to start the year.

Scott Richardson
Scott Richardson
President and CEO at Celanese

So we've seen some softness in auto in China. You know, Europe has been relatively stable to start the year, and U.S., you know, with the fleet mix becoming a little more certain and a focus of the OEMs around ICE and hybrids, you know, that could be a net good thing for us, but I would say to start the year, it's about as expected.

Patrick Cunningham
Patrick Cunningham
VP and Senior Equity Analyst at Citi

Got it. That's, that's very helpful. And then with, you know, halfway to your, you know, billion-dollar divestiture target, just any ideas on, you know, timing, you know, potential assets that you'd look to explore, you know, to achieve that, divestiture proceeds target?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, and just to kind of restate, you know, we called out $1 billion by the end of 2027. And to your point, we're about halfway there. You know, you know, we feel like, you know, we feel good about getting a deal done this year, another deal done this year, and, and we feel very good about, you know, achieving or exceeding that target, by the end of 2027. And, you know, again, we're prioritizing you know, parts of the business that don't fit, you know, the, the core operating models of Engineered Materials or Acetyl Chain. And that does kind of lead you to, a heavier focus on some of the joint ventures, as we've talked about in past quarters.

Scott Richardson
Scott Richardson
President and CEO at Celanese

So, you know, we have, what I would say is a pretty robust slate of things that are being worked, but it's hard to get deals done in this environment. But, you know, I, I'm proud of the team for what we did on Micromax. The speed at which, you know, we started that process to when we got it closed was approximately nine months, which is, which is pretty fast in, in any M&A market. And so, you know, we're gonna continue to, to work this with a, a sense of urgency.

Operator

Thank you. Our next question is coming from the line of Jeffrey Zekauskas with JPMorgan. Please proceed with your questions.

Jeffrey Zekauskas
Jeffrey Zekauskas
Managing Director and Senior Equity Research Analyst at JPMorgan

Thanks very much. When you take a step back and look at 2025, I think in the Acetyl Chain, your Adjusted EBIT was down about $400 million, and your Engineered Materials was down about $120 million. How do you analyze those changes? That is, how do you see the larger factors that were at work in those changes?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, let me start with acetyls, Jeff. You know, of that, it was pretty much all driven by volume and price. And you got a mix element that goes into that, so it's largely spread relatively evenly between those two, you know, of which, you know, a good chunk of that was driven by the acetate tow business. And so that was, you know, I'd say from a product line perspective, that was the bigger chunk. You know, we did see some margin compression, you know, from China as well, that went into that. And then the balance was really driven by Western Hemisphere volume. We didn't have as much margin compression in the non-tow part of the portfolio in the Western Hemisphere.

Scott Richardson
Scott Richardson
President and CEO at Celanese

So those are the biggest components in Acetyl Chain. You know, in, engineered materials, you know, volume and price, were, you know, the, you know, both, you know, I would say semi, equal overall in terms of, of how much they were down, and then it was offset by, by cost. And we had some, some cost benefit in acetyls as well. But those are the, the largest drivers, I would say, overall in, in both business. It really comes down to, you know, above the line variable margin.

Jeffrey Zekauskas
Jeffrey Zekauskas
Managing Director and Senior Equity Research Analyst at JPMorgan

Okay. And then for 2026, is your base case that you can get some EBIT growth out of Engineered Materials, but the Acetyl Chain might be challenged to grow in 2026? Or do you have a different approach? And what are the key markets that you really need to have improved in order for Celanese to excel in 2026?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, Jeff, when we started 2025, you know, we talked internally in the organization kind of a mantra around act now and win together. And I think it was really that action orientation that was really important with a focus on, you know, cost reduction and free cash flow generation. This year, you know, we're still going with act now, win together and grow. That growth piece that you highlight is important, and I do believe engineered materials in the current demand backdrop has, you know, more controllable ways to grow through our pipeline model. You know, it doesn't mean we won't be able to drive growth in Acetyl Chain.

Scott Richardson
Scott Richardson
President and CEO at Celanese

I just think that the groundwork that we've been laying in Engineered Materials and our ability to drive innovation and partner with customers, and, you know, designers and engineers around, you know, innovative solutions, just we have more degrees of freedom to do that, in Engineered Materials. You know, it's likely to be in, you know, you know, the higher growth areas like electronics that I called out earlier, elements of automotive continuing to penetrate, in, you know, higher margin, areas in China, and then continuing to, to partner with our customers on, innovation into, kind of the, what is now the chosen fleet mix, here in the Western world. So those are the, the big elements.

Scott Richardson
Scott Richardson
President and CEO at Celanese

You know, I do think we'll have some growth in medical as well, but I would say electronics and elements of automotive are gonna be the key components.

Jeffrey Zekauskas
Jeffrey Zekauskas
Managing Director and Senior Equity Research Analyst at JPMorgan

Okay. Thank you very much.

Operator

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

Turner Hendricks
Turner Hendricks
Research Analyst at Morgan Stanley

Hi, this is Turner Hendricks on for Vin. I'm just wondering, could you provide more color around your expectations for higher than first half earnings, and whether you still expect to see a $1-$2 of EPS uplift versus 2025?

Scott Richardson
Scott Richardson
President and CEO at Celanese

... Yeah, thanks for the question, Turner. You know, our team is still focused on, you know, $1-$2 of lift. You know, as I talked about in Engineered Materials, it's gonna be around driving growth there and getting, you know, volumetric growth, continuing to push price where we can, and the team continues to be focused on doing that in the pockets of the business where we can achieve it. Then also continuing to drive our cost reduction programs.

Scott Richardson
Scott Richardson
President and CEO at Celanese

In Acetyl Chain, it is about, you know, looking for those opportunities where, you know, the supply-demand balance, you know, we can be opportunistic around to be able to drive, volume and price, and, and start moving, kind of that, that sequentially on a quarterly basis, back, back in a, in a more positive, direction. Look, since the last time we spoke, there's been some things that changed. You know, our interest expense is likely to be relatively flat on the P&L year-over-year. You know, I think, you know, how we model out our inventory draw this year, it's likely to have, you know, some amount of P&L impact. And then, you know, the demand backdrop is certainly not, at least right now, where we were in the middle part of last year.

Scott Richardson
Scott Richardson
President and CEO at Celanese

If we return to that, then, you know, certainly that would be a really nice tailwind. So it's. I do think that we are working a plan, you know, to be able to drive growth here this year. You know, certainly, if we get any help whatsoever from the macro, you know, the. We are leveraged to be able to move up, you know, very quickly from an EPS perspective. You know, I'll just kind of remind you that a 1% improvement in volume in the Acetyl Chain is about $15 million-$20 million a year, and a 1% improvement in volume in EM is about $20 million-$25 million a year. So, yeah, these are small changes drive, you know, significant, you know, uplift for the business.

Turner Hendricks
Turner Hendricks
Research Analyst at Morgan Stanley

Great. Great, that makes a lot of sense. Thanks for the color. Also, when thinking about the difference between first quarter and second quarter earnings, I'm wondering whether we need to reverse the $30 million inventory tailwind that's benefiting 1Q, as well as the size of the Polyacetal turnaround and any other bridge items that you might call out?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, I think, you know, that's probably the right assumption, Turner, is, you know, that $30 million benefit we're gonna get is gonna likely dry out there in the second quarter. And, you know, we are gonna have some turnaround, higher turnaround expense, certainly in Q2. So I think, you know, with the dividend coming back in the second quarter, you know, all of those things relatively even out, I mean, you know, Q2 flattish to Q1, and certainly, you know, depending on where the demand environment is, you know, you might get some sequential benefit. But, you know, until we have better line of sight to that, you know, I don't know that flattish is the wrong way to think about Q2.

Scott Richardson
Scott Richardson
President and CEO at Celanese

As we called out in the prepared remarks, you know, we do believe this year is gonna be more second half weighted just because of that turnaround activity that we've got in the second quarter.

Turner Hendricks
Turner Hendricks
Research Analyst at Morgan Stanley

Great. Thank you for the color.

Operator

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

Ghansham Panjabi
Ghansham Panjabi
Senior Research Analyst at Baird

Thank you, operator. Good morning, everybody. You know, Scott, just on the Acetyl Chain and, you know, just zooming out a little bit and think about EBIT margins, which were sort of mid-teens last year versus the previous trend line in the mid-twenties. How much of that differential do you think is cyclical versus, you know, something having changed in terms of, obviously supply coming on and also some of the challenges that you're seeing on, Acetyl on the spot market?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, Ghansham, you know, how I view these things, you know, in our business, you know, over the last 20 years, you know, we've seen structural changes. You know, we saw, you know, and these could be headwinds, they can be tailwinds. And, you know, shale gas revolution in the U.S. certainly was a structural change. You know, the industry didn't get the benefit of that overnight. It's actions that were taken to be able to take advantage of those structural changes. You know, we saw overcapacity in China, for example, you know, come into the market the first time, you know, 2009 through, you know, 2017.

Scott Richardson
Scott Richardson
President and CEO at Celanese

It was, you know, actions and business model changes that we and others made to be able to, you know, drive a more sustainable and higher level of earnings. Certainly even today, where we sit now in, you know, the current market with overcapacity, and where it is in acetyls, you know, the underlying business today is better than it was during 2012 and 2013. So I think it really is about how we as a company respond to changes that we see in the market. You know, I do believe that through those changes, you know, you will see things start to move back up. Now, each cycle is different.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Each cycle is shorter or longer, and, you know, it, nobody can really predict how long it will last, but it is about responding to those changes that we see. On the Engineered Materials side, we've seen changes as well. You know, the move from ICE to EV in China in particular is a big structural change. It's not likely to change. We have to adapt to that. We have to change, we have to respond to that from a market perspective, and we have to continue to drive, you know, efficiency in our own business so that when we see small incremental changes in volume that I talked about earlier, you know, those underlying margins are higher in the future than they were in the past.

Ghansham Panjabi
Ghansham Panjabi
Senior Research Analyst at Baird

Okay, got it. And maybe a question for Chuck on, you know, free cash flow. Obviously, 2025, you know, working capital was big for the year in terms of driving the, you know, free cash flow outperformance there. What are you embedding for 2026 for working capital and, you know, more broadly, what's defining your, your confidence on free cash flow relative to what seems to be a pretty challenged operating environment, at least for the first half of the year? Thanks.

Chuck Kyrish
Chuck Kyrish
CFO at Celanese

Yeah. No, thanks, Ghansham. I think what's, what's driving our confidence is, you know, our ability to pull levers to generate free cash flow in all demand environments. You mentioned working capital. It was very strong in 25 to 390. You know, we are targeting another $100 million, Ghansham, you know, primarily from further inventory reductions. You know, cash tax is gonna be lower this year, $50 million-$60 million. Cash interest is down about $50 million, and the cash that will outlay for cost reduction programs that are- that's adjusted out of EBITDA, that'll be lower by about $25-$50.

Chuck Kyrish
Chuck Kyrish
CFO at Celanese

So, as you know, you know, we plan for a number of different scenarios, Ghansham, and we feel confident that we can drive free cash flow into our target range that we provided, either through modest earnings growth or through these additional levers that we know how to pull.

Ghansham Panjabi
Ghansham Panjabi
Senior Research Analyst at Baird

Okay, thank you so much.

Operator

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

Salvator Tiano
Salvator Tiano
Equity Research Analyst at Bank of America

Yes, thank you very much. So firstly, I want to come back a little bit to the APS growth this year, and, you know, you have in your prepared remarks all the free cash flow, I guess, outlook and the puts and takes on free cash items. And it seems to us, if you do some rough math, that points to probably net income or EPS change, EPS this year of around mid- to high-4s, as a base case. Does that make sense? And are there any items we may be missing that would deviate, you know, that would make your EPS deviate from that as a base case?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yes, Sal, how I'd look at it is our prioritization right now is around free cash flow and continuing to drive, you know, sustainable changes in, into our business models. As we look at the year, we've run a number of different scenarios on kind of where things could play out from a demand standpoint, and then what that translates into to EPS. And, you know, for us, that's, we're confident in being able to, you know, generate that free cash flow between $650 million and $750 million.

Scott Richardson
Scott Richardson
President and CEO at Celanese

So there's a number of different EPS scenarios that get you to that number, just depend on the movements and timing and the fact that we're, you know, second half weighted also certainly plays a little bit of a role just in terms of, you know, how much AR is sitting on the balance sheet as we model it out. So all of those factors go into play, you know, in terms of how we model it. So, you know, we're not looking at a finite range right now. Our focus is on really driving and maximizing as much as we can and working to grow on a year-over-year basis, with an emphasis on ensuring that we are delivering the cash flow.

Salvator Tiano
Salvator Tiano
Equity Research Analyst at Bank of America

Okay, perfect. I wanted to ask a little bit about capacity additions on the Nylon and the POM chains, specifically because these are something you had to face the past few years. Can you provide us with some information on what may be coming online, particularly in Asia, in these chains? And what is kind of your exposure, given you've moved away from some chains, such as Nylon polymerization? What would be your exposure if there's more capacity coming online in these chemistries?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, Sal, as we've talked about in the past, you know, our focus really is to continue to build flexibility into our operating model, you know, in our Nylon business, as well as, you know, some of our other polymers. And that means being balanced in, you know, what we make, but also what we buy. And so the additional capacity, you know, that may come on in Asia, and, you know, to be very honest, it's already overcapacitated in China, and, you know, we're taking advantage of that by, you know, buying as much polymer as possible because, you know, that's a more advantageous way for us to, you know, be able to supply our business in that region of the world.

Scott Richardson
Scott Richardson
President and CEO at Celanese

It is about being opportunistic and about building flexibility, you know, into our model, and what I would tell you is, we are gonna continue to evaluate options to be able to enhance and maximize profitability in all our value chains, including Nylon.

Salvator Tiano
Salvator Tiano
Equity Research Analyst at Bank of America

Thank you very much.

Operator

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

Kevin Estok
Kevin Estok
VP of Equity Research at Jefferies

Good morning. This is Kevin Estok for Lawrence. So just on working capital inventories again, you know, obviously you're targeting, you know, an additional reduction, and I guess I was wondering, what guardrails are you sort of using to avoid service issues? Are there any specific product families, I guess, where inventory is still elevated? And maybe, I guess, what's the timeline to reach a steady state inventory model?

Chuck Kyrish
Chuck Kyrish
CFO at Celanese

Yeah. So it's a very coordinated approach internally, right? We're never gonna take too much risk on service levels and delivering to our customers, right? There's many different ways you can reduce inventories. You can reduce raw materials, you can change your offtake agreements, and you can reduce, you know, finished goods, right? So we're in a multiyear journey on that, so we don't ever like to think that we're done.

Chuck Kyrish
Chuck Kyrish
CFO at Celanese

You know, we think we do have $100 million this year, but, you know, we're not gonna stop there. There's a lot of efficiency that EM is driving within the organization, and you're just gonna need less and less inventory as you go forward, right? So it's a constant, it's a constant activity of ours, and we feel good about continuing that progress.

Kevin Estok
Kevin Estok
VP of Equity Research at Jefferies

Got it. Okay, thanks. And then just as a follow-up, so on acetate tow, I guess, obviously one of the biggest headwinds, I guess, what are...

Kevin Estok
Kevin Estok
VP of Equity Research at Jefferies

I know you, you touched on some of this already, but I guess curious what the specific levers that, I guess, you can do to stabilize to stabilize tow and basically, like, you know, regional mix shifts, any capacity actions, customer inventory normalizations, contract resets, I mean, and I guess when should we expect measurable improvement?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Look, we're working this with a level of aggressiveness, you know, as we look at every element of the business, and, you know, that includes cost structure. It also looks at, you know, how we go to market, our, you know, future contracts. In this business, you have to take you know, both a short-term view and a long-term view of, of how, you know, things are rolling in and rolling off. And so it is really about stabilization. You know, we, we did see a decline. I do think, you know, there, there has continued to be a, an element of destocking. I think there was a lot of inventory throughout the value chain, in this business. I think, that will probably take another quarter or so. So think mid-year, where that evens out is our current estimation.

Scott Richardson
Scott Richardson
President and CEO at Celanese

You know, then you should get to a little bit more steady state, and I think, you know, get a little bit more balance here as we get into the middle part of the year.

Kevin Estok
Kevin Estok
VP of Equity Research at Jefferies

Okay, thank you.

Operator

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

Aleksey Yefremov
Aleksey Yefremov
Managing Director and Equity Research Analyst at KeyBanc Capital Markets

Thanks. Good morning. There's a number of price increases that were announced in the polymers world. I wanted to ask you about your expectations for achieving those. And also, is the intent here to offset rising raw material costs or actually expand margins? Thank you.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, in some of these polymers, Aleksey, you know, margins have got to where, you know, they're at unsustainable levels. And I think you can look at, you know, challenges we've seen in the industry and, you know, you've seen, you know, some folks in the marketplace, go into default. And, you know, I think that has just shown that, you know, things are at an unsustainable level. I'm proud of the way the team, you know, got ahead of this a few years ago by, taking action in our footprint, in our highest cost locations, and so that has, you know, certainly helped us be able to weather that storm. But, you know, as we go forward, you know, the returns need to improve here.

Scott Richardson
Scott Richardson
President and CEO at Celanese

So it really is about, you know, pushing to drive returns to just an acceptable level going forward and, you know, the team continues to push that. You know, I do think it's going to continue to be a... It's gonna take some time. It's gonna be a step-by-step process. I wouldn't expect us to get all of it at once, but, you know, it is about continuing to work this, you know, as we are having dialogue with our customers.

Aleksey Yefremov
Aleksey Yefremov
Managing Director and Equity Research Analyst at KeyBanc Capital Markets

Thank you. And as a follow-up, Acetyl spreads have been a little better in China lately. What are your expectations for anti-involution or any kind of rationalization in that country, just based on your knowledge of what government might be thinking?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, as I mentioned before, I mean, we've gone through, you know, big overcapacity in the acetyl business in China in the past. You know, when I was living there, you know, in 2009, we, you know, the first overcapacity, you know, came in, and we were in that period for a long time. You know, I think, you know, the pattern of behavior that we've seen over the last year or so, you know, does kind of tend to trend with what we saw in the past, which is, you know, new capacity comes in. There was a lot of new capacity over the last couple of years.

Scott Richardson
Scott Richardson
President and CEO at Celanese

As those plants are starting up, you know, they run at high rates to prove out the technology, but, you know, margins are unsustainable, and so rates come back down and, you know, margins move up a little bit. And so we certainly have seen that trend continue, and things have stabilized, I'd say, you know, at, at higher, albeit still relatively low levels on a margin basis, over the last eight weeks or so. So, you know, we're not at, you know, forecasting, you know, huge lifts by any stretch of the imagination. And, you know, the, the, the team will continue to, to kind of work, you know, near term and instantaneous opportunities on both a price and volume basis.

Operator

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

Aziza Gazieva
VP and Co-Founder at Fermium Research

Hi, guys. Good morning. It's Aziza on for Frank. Scott, I was curious if maybe you can provide some thoughts on, you know, Chinese acetyls pricing as we progress through 2026.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, Aziza, I mean, look, we're not gonna forecast any huge uplifts. I think, you know, we would expect things to stay in the range they've been, you know, over the last several quarters. I mean, plus or minus, kind of where they kind of... Ben, as I just said, you know, we've kind of stabilized at these levels over the last eight weeks or so. You know, demand right now is extremely low, as we're in Chinese New Year. And you know, this year's Lunar New Year is a longer holiday than what we typically see by a few extra days. So it'll be interesting to see how things come out. It's a later New Year, as well. But certainly demand was relatively stable going into the New Year holiday. Pricing held, and that doesn't always happen.

Scott Richardson
Scott Richardson
President and CEO at Celanese

You know, sometimes as you're getting into that New Year period, pricing falls off. It stayed relatively stable as we went in. So, you know, we'll see kind of where things come out, but we are not anticipating, you know, really big uplift coming from Asia. As we look at, you know, recovery scenarios in the acetyl business, you know, we tend to really look at Western Hemisphere only. And so, you know, those numbers I quoted earlier about a 1% improvement in volume being $15 million-$20 million, that's on Western Hemisphere only. That doesn't include any of the business in China, just because I think with where overcapacity is, if we get upside in volume and price, we'll take it, but, you know, we're not going to necessarily bake that into our numbers.

Aziza Gazieva
VP and Co-Founder at Fermium Research

Got it. And also, regarding the second quarter POM turnaround, have you guys quantified the impact to the second quarter earnings?

Scott Richardson
Scott Richardson
President and CEO at Celanese

No. I mean, what we said earlier is think a number similar to the lift, in, that we called out of, of $30 million. So that, that's, you know, the, the right range. I mean, yeah, typically, these turnarounds in the past were about every three or so years. You know, we've, we've worked really hard, you know, on our reliability, over the last several years to where, you know, we've been able to extend this, to five years between these major turnarounds. So, you know, this is, you know, not something that, that certainly happens every year, in the asset. And, you know, so it is a little bit larger than we would typically see, but it really is contained to the second quarter.

Aziza Gazieva
VP and Co-Founder at Fermium Research

Got it. Thank you.

Operator

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

Hassan Ahmed
Hassan Ahmed
Partner and Head of Research at Alembic Global

Good morning, Scott and Chuck. Look, I wanted to revisit the $650 million-$750 million free cash flow guidance you guys provided. Look, I mean, you know, it's anyone's guess what demand does, but you know, if we were to take a draconian view and say that demand really doesn't improve much from Q4 levels, you know, what does that do to the guidance, you know, and all the other aspects baked into it? Meaning, you know, the $100 million sort of working capital uplift that you guys guided to and the like.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah. First of all, Hassan, I would never refer to you as draconian by any stretch of the imagination. So, look, I not to be repetitive, but I'm gonna kind of go back. You know, we model out a lot of different scenarios, kind of that low demand scenario, higher demand scenarios. I mean, we kind of look at different permutations. We also have you also have to plot timing. And so as we kind of look at that, you know, you end up range finding for, you know, where you think you can, you move on cash flow, given the other actions that you can take, and how, you know, AR and inventory can move and what you can do through the year.

Scott Richardson
Scott Richardson
President and CEO at Celanese

So, you know, as we kind of range find for that, you know, we do feel very confident in that $650-$750 range that we put out there.

Hassan Ahmed
Hassan Ahmed
Partner and Head of Research at Alembic Global

Understood. Understood. Just moving on, again, you know, as it relates to sort of you know, debt paydowns and the like, I mean, you guys seem pretty comfortable with the incremental $500 million of sort of asset sales. You know, so A, what gives you that comfort to achieve that by 2027? And B, if need be, could that number actually be higher?

Chuck Kyrish
Chuck Kyrish
CFO at Celanese

Yeah, I mean, we're aggressively pursuing, you know, additional divestitures. And Scott, as Scott mentioned, we feel good about, you know, getting another one of those done. There's a lot of things that we can look at. You know, that's part of our cash generation, that's part of our debt paydown strategy. You know, that's a probability weighted number, so theoretically, that could end up at a higher number. But, we're targeting right now $1 billion total by the end of 2027 to help us deleverage the balance sheet.

Hassan Ahmed
Hassan Ahmed
Partner and Head of Research at Alembic Global

Very helpful. Thank you so much.

Operator

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

Michael Sison
Michael Sison
Managing Director at Wells Fargo

Hey, guys, sorry about that. You know, you sort of noted that the Western Hemisphere acetyl margins are better or holding up better. You know, how much of your business is Eastern, and is there any reason to be there longer term? I mean, this trough in the Eastern Hemisphere has been pretty, pretty deep. You know, does it make sense to reduce some capacity, you know, for that area longer term?

Scott Richardson
Scott Richardson
President and CEO at Celanese

You know, Mike, you've known us for a long time. You know that, you know, we look at every option on the table, and we continue to look at what the short-term needs of the business are and balance that with where we think we need to be long term. And, you know, we will look at what the footprint in both businesses, you know, needs to look like and what the right match is. So, you know, I would say we're constantly, you know, evaluating, you know, where we need to be and how we need to be operating the assets. And, you know, the Acetyl team continues to pivot there.

Scott Richardson
Scott Richardson
President and CEO at Celanese

You know, we're block operating, you know, the Frankfurt VAM unit, block operating the Singapore acetic acid unit as well, and just for that very purpose and finding ways at which to be more efficient and squeeze out costs.

Michael Sison
Michael Sison
Managing Director at Wells Fargo

Got it. And then, you know, if you take a look as we head into the second half, and we sort of sat here last year thinking things couldn't get worse. But if there were areas within EM or the Acetyl Chain that could get worse, what do you think it could be? And it does sound like things are more stable, sequentially at least. But, you know, what are the things we need to watch out for if things could potentially get worse on the macro side for you?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Mike, we're not gonna take anything for granted, and we're gonna continue to evaluate, take bold actions, you know, across the portfolio. We knew, you know, as we started last year, that we needed to kind of reset the growth mindset in Engineered Materials. And I feel like Todd Elliott and the team have done a great job of building the pipeline and refocusing commercially on those areas where we can really drive high quality wins, and making sure our time is being spent there, with a focus on quality over quantity. And I think that is really gonna start to pay off for us, as we work our way through 2026.

Scott Richardson
Scott Richardson
President and CEO at Celanese

We're gonna continue to evaluate the cost side of the equation in both businesses, as well as from a corporate perspective, because I do think it is really about how we generate, you know, operating leverage going forward. So those are our priorities, with cash as being kind of that keen focus and delivery of our cash target.

Michael Sison
Michael Sison
Managing Director at Wells Fargo

... Great. Thank you.

Operator

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

Kevin McCarthy
Partner at Vertical Research Partners

Yeah, thank you, and good morning. Scott, in explaining the, the volume decline of 6% in the quarter, I think you mentioned in the prepared remarks last night that the destocking and, and seasonality were, were kind of greater than expected. And so I wonder if you could comment on, the degree to which you've seen any rebound or, or, you know, temporary restocking in January and early February ahead of the Lunar New Year, or has it been mixed or, or just not happening? Just, just looking for any additional color on, you know, kind of incremental volume stability or improvement as you see it.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, let me start with the Acetyl Chain. I think, you know, we've seen, you know, some moderate seasonal improvement, largely in the coatings space, and we'll see kind of where things, you know, pan out as we get into March and April, which tends to be, you know, when demand, you know, moves up higher. So I would say that it's moderate at this point. We haven't seen substantial change, positively in the acetate tow side of the equation there in acetyls. You know, in Engineered Materials, what we called out last quarter was that we knew we were gonna see some destocking from our channel partners here in the Americas. You know, we're starting to see that come back to the order book.

Scott Richardson
Scott Richardson
President and CEO at Celanese

And we've seen, you know, seasonal improvement in spaces like automotive in the Western Hemisphere, you know, to start the quarter. So that is pretty much as expected, and as is typical, you know, as we see from Q4 to Q1.

Kevin McCarthy
Partner at Vertical Research Partners

Okay, and then, to follow up on your divestiture efforts, sounds like the focus, or at least one of the focus areas, would be your joint ventures. You've got quite a few of them, I think. Maybe can you provide any color, as to where you are, in that process and whether or not we might expect something this year or more likely next year? Are you looking at multiple JVs or focusing on a primary target? Any color there would be helpful.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, what I would tell you, Kevin, is we are looking at a lot of different things, and we have a pretty robust portfolio of options of varying sizes. You know, some small, some, you know, getting a little closer to the size of Micromax. And, you know, as Chuck mentioned earlier, we probability weight that. You know, we feel good about getting another deal done here in 2026. I don't know exactly, you know, where it will fall in the size spectrum. It might be a smaller one, but certainly would be attractive even if it's small. So, you know, we are kind of working all elements. It may be that, you know, it takes a few of these deals to get to the target, and maybe, you know, it takes one deal.

Scott Richardson
Scott Richardson
President and CEO at Celanese

It just, it kind of depends upon how these things materialize here over the course of the next, you know, year and 1/2.

Kevin McCarthy
Partner at Vertical Research Partners

Thanks very much.

Operator

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

Josh Spector
Josh Spector
Executive Director of Chemicals Equity Research at UBS

Yeah. Hi, good morning. I want to just ask on the earnings and Engineered Materials. If I kind of take your comments on first half, you know, your, your EBIT is maybe around $200 million 1/4 on average. You know, looking at last year, kind of similar levels to what we saw in 2Q, 3Q. I'm obviously ignoring seasonality in the weaker 1Q a year ago, but I'm just wondering that, you know, we're not seeing some of the cost initiatives really come through. You're talking about them more second half, but you've been talking about the cost initiatives for, you know, 6, 9 months now. So why aren't we seeing it as much in the first half? And why does it take to the second half, on the cadence of timing?

Josh Spector
Josh Spector
Executive Director of Chemicals Equity Research at UBS

Then when you talk about the new products and the higher margins, kind of the same thing, like, when do we start to really see more of this, and why not now?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, Josh, I'm gonna respectfully disagree with you. I think you're definitely seeing it roll through. You know, we are in a much lower demand environment today in that business than where we were in the middle part of last year. And, you know, we're still performing at very similar levels. And that really is coming from the mix improvement we've seen, as well as the cost reductions the business is taking, and we're gonna continue to drive that forward. As I said, you know, there's such a leverage on volume in this business, you know, with a 1% change kind of being, you know, $5+ million 1/4. You know, the amount of change that we've seen in that business is sizable on a year-over-year basis, volumetrically.

Scott Richardson
Scott Richardson
President and CEO at Celanese

It really is about, you know, continuing to improve the underlying fundamentals of this business, and, and those small incremental changes in the demand are gonna flow right back to the bottom line.

Josh Spector
Josh Spector
Executive Director of Chemicals Equity Research at UBS

Thank you, Scott. Appreciate the thoughts.

Operator

Thank you. Our next question has come from the line of John Roberts with Mizuho. Please proceed with your questions.

John Roberts
John Roberts
Managing Director and Senior Equity Research Analyst at Mizuho

Thank you. Have you actually guided for the China Tow dividend expected for the final three quarters of 2026 in your, in your free cash flow range?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, John, think pretty flat to last year is what to expect, that $40-ish million 1/4.

John Roberts
John Roberts
Managing Director and Senior Equity Research Analyst at Mizuho

Okay. And then, you once explored some consolidation opportunities in the acetate tow industry. Does the contraction in the industry increase the chance of revisiting further consolidation, maybe in a different form or different partner than what you earlier pursued?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, I don't know that the landscape has changed considerably, John, overall, in terms of the fundamentals. But, you know, look, we are always very open to options in all of our businesses. And so, you know, we explore every opportunity that might be out there. But I think on tow, I just don't know that the fundamentals have changed enough to change that outcome.

John Roberts
John Roberts
Managing Director and Senior Equity Research Analyst at Mizuho

Thank you.

Scott Richardson
Scott Richardson
President and CEO at Celanese

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

Operator

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

Analyst at RBC Capital Markets

Hi, good morning. This is Adam on for Arun, and thanks for taking our question. If I could, ask maybe Hassan and Ghansham's question in another way. It seems like, you know, the working capital management change for 2026 is almost a $300 million headwind. And you talked about, you know, some benefits from lower cash, about $25 million, taxes lower by $40 million-$50 million. Is the balance of that from earnings improvement? And if not, where is that coming from? And how much earnings improvement are you really expecting to impact your free cash flow? Thanks.

Chuck Kyrish
Chuck Kyrish
CFO at Celanese

Yeah. Thanks, Adam. Yeah, you're right. I mean, the working capital headwind year-over-year is sizable, and some other things that a lot said it, as you mentioned. But again, I'll say again, we feel good about driving free cash flow into that range, either through modest earnings or through further levers if we see a lower demand scenario play out. It's very similar to what we did this year in 2025, so we're confident in that range.

Analyst at RBC Capital Markets

Okay, great. Apologies if I've missed this, but have you guys outlined, in terms of a cost benefit from the Lanaken closure, you know, kind of market impacts aside?

Scott Richardson
Scott Richardson
President and CEO at Celanese

Yeah, so Lanaken closure for us is gonna be about a $20 million-$25 million cost benefit on a full year basis, and about $5-$10 of that we expect to get this year.

Analyst at RBC Capital Markets

Thank you.

Scott Richardson
Scott Richardson
President and CEO at Celanese

Well, thank you everyone. You know, we'd like to thank everyone for listening in to today's call, and as always, we're available after the call for any follow-up questions. Daryl, with that, let's please go ahead and close out the call.

Operator

Thank you so much, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time. We appreciate your participation. Enjoy the rest of your day.

Executives
Analysts
    • Aleksey Yefremov
      Managing Director and Equity Research Analyst at KeyBanc Capital Markets
    • Aziza Gazieva
      VP and Co-Founder at Fermium Research
    • David Begleiter
      Managing Director and Senior Equity Research Analyst at Deutsche Bank
    • Ghansham Panjabi
      Senior Research Analyst at Baird
    • Hassan Ahmed
      Partner and Head of Research at Alembic Global
    • Jeffrey Zekauskas
      Managing Director and Senior Equity Research Analyst at JPMorgan
    • John Roberts
      Managing Director and Senior Equity Research Analyst at Mizuho
    • Josh Spector
      Executive Director of Chemicals Equity Research at UBS
    • Kevin Estok
      VP of Equity Research at Jefferies
    • Kevin McCarthy
      Partner at Vertical Research Partners
    • Michael Sison
      Managing Director at Wells Fargo
    • Patrick Cunningham
      VP and Senior Equity Analyst at Citi
    • Salvator Tiano
      Equity Research Analyst at Bank of America
    • Turner Hendricks
      Research Analyst at Morgan Stanley
    • Analyst at RBC Capital Markets
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