Celanese Q2 2026 Earnings Report

Celanese EPS Results

• Actual EPS: $2.45
• Consensus EPS: $2.23
• Beat/Miss: Beat by +$0.22
• One Year Ago EPS: $1.44

Celanese Revenue Results

• Actual Revenue: $2.75 billion
• Expected Revenue: $2.75 billion
• Beat/Miss: Beat by +$6.53 million
• YoY Revenue Growth: +8.70%

Celanese Announcement Details

• Quarter: Q2 2026
• Date: 8/4/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 10:00AM ET

Celanese (NYSE:CE) is a global chemical and specialty materials company that develops, manufactures and markets a broad portfolio of products serving diverse industries. The company operates through two primary business segments—Engineered Materials and Acetyl Chain—offering solutions that range from high-performance polymers and specialty additives to industrial chemicals and intermediates. Its engineered materials are used in applications such as automotive components, consumer electronics, medical devices and packaging, while its acetyl derivatives find uses in coatings, adhesives, solvents and personal care products.

In the Engineered Materials segment, Celanese produces a variety of high-performance thermoplastics, polyether-block-amide (PEBA) elastomers and functional additives designed to enhance product durability, thermal resistance and sustainability. The Acetyl Chain segment manufactures acetic acid, vinyl acetate monomer (VAM), cellulose acetate and related derivatives, which serve as key building blocks for downstream industries, including textiles, pharmaceuticals and tobacco. The company emphasizes innovation in polymer science and catalysis to meet growing customer demands for lightweight, high-strength and eco-efficient materials.

Founded in 1918 as the American Cellulose & Chemical Manufacturing Company, Celanese has evolved through decades of technological advancements and strategic restructuring. Today it is headquartered in Irving, Texas, and maintains manufacturing and research facilities across North America, Europe and Asia. This global footprint enables the company to serve customers in automotive, industrial, packaging, consumer and healthcare markets worldwide.

Leadership is centered in its Irving headquarters, where President and Chief Executive Officer Lori Ryerkerk oversees corporate strategy, R&D investment and sustainability initiatives. Under her guidance, Celanese continues to expand its specialty materials offerings and improve operational efficiency while maintaining a focus on environmental stewardship and safety.

Celanese Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Celanese reported stronger-than-expected second-quarter benefits from supply-chain disruptions, particularly in the Acetyl Chain, while maintaining its full-year adjusted earnings outlook of approximately $6 per share.
• Negative Sentiment: Third-quarter results are expected to be pressured by accelerated Lanaken and Engineered Materials closures, inventory absorption, raw-material inflation, and approximately $10 million of lower Ibn Sina equity earnings; Q3 adjusted EBIT guidance is $135 million to $175 million.
• Positive Sentiment: Engineered Materials is gaining traction in higher-value applications such as data centers, electronics, medical devices, drug delivery, and electric-drive automotive components. Electronics and medical represent roughly 10% and less than 10% of EM revenue, respectively, but contribute disproportionately high margins.
• Positive Sentiment: Management expects $80 million to $100 million of additional cost reductions in 2027, alongside benefits from the Lanaken closure and nylon optimization, with $700 million to $800 million of annual free cash flow described as a sustainable baseline.
• Positive Sentiment: Celanese remains committed to its $1 billion divestiture target by the end of 2027, expects to announce at least one additional transaction by year-end, and projects net debt declining from roughly $10 billion this year to $9 billion next year.

Presentation

[Operator]

Greetings. Welcome to the Celanese Q2 2026 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the brief remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Bill Cunningham. Thank you, Bill. You may begin.

[Bill Cunningham, VP of Investor Relations at Celanese]

Thanks, Daryl. Welcome to the Celanese Corporation second quarter 2026 earnings conference call. My name is Bill Cunningham, Vice President of Investor Relations. With me on the call today are Scott Richardson, President and Chief Executive Officer, and Chuck Kyrish, Chief Financial Officer. Celanese distributed its second 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 these materials have also been submitted to the SEC.

[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 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up question. Our first question has come from the line of Patrick Cunningham with Citi. Please proceed with your questions.

[Patrick Cunningham, Analyst at Citi]

Hi. Good morning. Thanks for taking my questions. I was hoping you could talk through the normalization of some of the supply-related opportunities in the Acetyl Chain. Perhaps it's a bit more pronounced than we expected. How would you characterize the operating environment, Western Hemisphere versus Eastern Hemisphere? We've also started to see some upward movement in Asia spreads in recent weeks. What is driving that, and is any of that contemplated in expectations for the balance of the year?

[Scott Richardson, President and CEO at Celanese]

Thanks for the question, Patrick. I think our team showed a really strong resiliency and flexibility in the quarter, and I think it was evidenced by the opportunities we had that the global production and supply chain network that we have here at Celanese, really in both businesses, gave us some benefits in the quarter. In Acetyl Chain specifically, the team took actions as we got to the end of Q1, the early part of Q2, to ensure that we're going to be able to provide our customers with a reliability of supply. I think we certainly did that up and down the value chain, particularly in parts of the world that were more acutely impacted by the supply chain crisis, like Europe. Team did a good job of that.

[Scott Richardson, President and CEO at Celanese]

We called out an expectation of moderation in the second half of the year, and that was contemplated in our $6 guide back when we did our call in May. I think as we look at things today, I wouldn't say that moderation has been any more acute than what we expected. I think what we have seen happen is just some changes a little bit in the environment, and we ended up getting a little bit more benefit in the second quarter than we had originally guided to. Some of that was a slight amount of EM pre-buying that we called out.

[Scott Richardson, President and CEO at Celanese]

Q3 may be a little lower than we had originally guided to, really driven by the fact that we've been able to accelerate the plant closure in Lanaken and pull forward a little bit the EM closures as well, which is driving more of an inventory absorption hit in the second half than originally anticipated. In addition, because Ibn Sina didn't operate in the second quarter for much of the quarter, our equity earnings is going to be about $10 million lower than we had originally anticipated this year, which is all pretty much hitting in the third quarter. That's really that dynamic of Q2 to Q3. From an expectation perspective, the moderation that we had anticipated is about as expected.

[Patrick Cunningham, Analyst at Citi]

Understood. Very helpful context. Just on the EM grow and fortify strategy, you've been calling out data centers, medical electronics. Maybe it would be helpful to get some context on the base levels of revenue here of this potential growth platform. How do you plan to grow and protect market share in these high-value applications, and what sort of long-term growth rates do you expect there?

[Scott Richardson, President and CEO at Celanese]

I think our overarching objective in the Engineered Materials business is to ensure that we're aligning what we believe is the unique capabilities and products that we have with a deep understanding of key end markets and having segment strategies that go deep. The macro end uses that we go into, when you look at them at a very high level, don't have maybe a lot of growth. When you really dig in and get to some of the sub-segment areas, there are really great pockets of opportunities there. We've been reorienting our team in terms of a focus standpoint now for more than a year to ensure that we can really penetrate these sub-segment areas.

[Scott Richardson, President and CEO at Celanese]

When you look at electronics, for example, today that's about 10% of the revenue of the Engineered Materials business, but actually makes up about 10%-15% of the contribution margin that we make in the business. Medical is less than 10% of the revenue, but about 20% of the contribution margin that we make. These two segments are not just foundational today for us, but with the amount of growth that we're seeing and the work that we're doing to be aligned around the right customers and to be able to penetrate what we think is going to be differentiated opportunities that we're going to be able to really have good long-term sustainable business and growth. We think that sets up really nicely for the future.

[Operator]

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

[Ghansham Panjabi, Analyst at Baird]

Thank you. Good morning, everyone. Going back to the AC segment. Obviously, it's been a very volatile year, Scott, as you zoom out, how have things changed relative to the pre-war baseline as you think about the various product lines and geographies you have exposure towards? Just trying to disaggregate some of the complexity on a day-to-day basis versus from a high level standpoint, what's actually been happening.

[Scott Richardson, President and CEO at Celanese]

Yeah. Thanks, Ghansham. We've said for a long time that the majority of our profitability in the Acetyl Chain occurs in the Western Hemisphere. This is not new. When we look back over the last 15 years, that kind of +80% profitability being generated by the West has played out for, call it, 12 of the last 15 years. This is not a new environment that we're in. We did see margins in Asia move up in the 2021 through 2023 timeframe. Outside of that, this has been the environment we've been dealing with for a long period of time. The team has really been pivoting the operating model in a way, with more and more of our tons being sold in the form of downstream derivatives because we have more differentiation there.

[Scott Richardson, President and CEO at Celanese]

We're able to create some more unique innovation opportunities, and to be able to drive through and be able to keep the profitability where it has been, even where the macro backdrop isn't strong. We have this ability to flex up where needed and with the capacity that we have, in the Western world, and be able to flex that like we did in the second quarter. Just goes back to that coiled spring analogy that I used last quarter. When we have the ability to flex that up, we will, and we see the benefits that come from that. The profitability increase that we saw from Asia, from call it the end of February through to where we are today, was very much short-lived. Really by the middle part of Q2, we were back to pre-war margins.

[Scott Richardson, President and CEO at Celanese]

We are not back to those pre-war levels from a margin standpoint, in the Western world. We expect the markets to remain relatively constructive here through the balance of the year, albeit, supply chains have found a way to normalize to some extent. While product may not be flowing out of the Middle East, it is flowing from other places. That does create some more compression in the margins, but they still are at higher levels in that business. The team continues to do everything it can to contract business where we were able to get additional business because of our reliability of supply. We're really partnering with customers to be able to get business under contract for next year and beyond.

[Ghansham Panjabi, Analyst at Baird]

Okay. Thanks for that, Scott. Maybe a question for Chuck on free cash flow and the $700 million-$800 million guidance for 2026. How have the moving parts there, working capital, et cetera, changed relative to your view three months ago, as it relates to that guidance?

[Chuck Kyrish, CFO at Celanese]

Yeah. Thanks, Ghansham. Not a lot has changed. We're very confident in the free cash flow range that we've put out there. In the second quarter, $140 million of free cash is actually pretty good considering the amount of working capital we've built up in the quarter, almost $200 million use of cash in the quarter. Understandable, it's basically accounts receivable. We sit today at year-to-date, a use of cash of almost $300 million working capital. That will normalize over the second half, Ghansham, we're seeing that now, right? I think we've talked about earnings increase of this year benefiting free cash flow both in this year and next year, and that's still the right assumption. Right now, I'd probably say working capital for the year, Ghansham, is somewhere between neutral, meaning zero, to slightly positive. Not a lot changed.

[Chuck Kyrish, CFO at Celanese]

I feel really good about the free cash flow range. I'd also point out, though, that as we look ahead, I would consider this $700 million-$800 million of free cash flow as our sort of baseline sustainable level. As we look into next year, we are not done on our working capital reduction efforts. Particularly looking to take more structural inventory out of Engineered Materials. We do expect cash costs of restructuring activities, which is adjusted out of our EBITDA. Those will continue to decline a bit next year. Again, we do expect some of the benefit of 2026 to hit 2027. Confident in the free cash range of this year, I would really consider that sort of our baseline sustainable level over the next few years.

[Ghansham Panjabi, Analyst at Baird]

Perfect. Thanks for that.

[Operator]

Thank you. Our next questions come from the line of Jeff Zekauskas with J.P. Morgan. Please proceed with your question.

[Jeff Zekauskas, Analyst at J.P. Morgan]

Thanks very much. Your Acetyl Chain volumes were flat year-over-year in the quarter. Why didn't they grow? I would expect that in the June quarter, you had capacity available, you were low cost. There are competitor outages. Why wasn't volume better?

[Scott Richardson, President and CEO at Celanese]

Jeff, I think a lot of it's mix. We've continued to see some destock in the acetate tow part of the value chain. That volume was lower on a year-over-year basis, which was kind of offsetting the gains that we saw in the vinyls chain. We definitely did, to your point, see higher volumes there, but you're seeing a level of offset from the acetate tow segment. Q2 last year, we did see some level of seasonal improvement from Q1 into Q2 in kind of the emulsion side of things as well. From a comp basis, it was already a slightly higher quarter, Q2 to Q2, but those are the dynamics that are playing out there.

[Jeff Zekauskas, Analyst at J.P. Morgan]

In Engineered Materials, exclusive of the divestiture, if you had to describe your volumes to the auto sector and all of your volumes to the non-auto sector, what would those growth rates be in the quarter?

[Scott Richardson, President and CEO at Celanese]

Auto kind of moves with builds for the most part, Jeff. On a year-over-year basis, we saw builds down year-over-year, Q2 to Q2. You saw an impact there of a few percentage points, which kind of is offset by the volumes we've seen in other places and some of our penetration into some of the growth areas of automotive, like we called out, like electric drive units. I think, when you kind of look at the macro side, auto down year-over-year. Because volumes, when you exclude the divestiture, were pretty much flattish year-over-year. Those are kind of everything non-auto was up, and then auto kind of moving with builds.

[Jeff Zekauskas, Analyst at J.P. Morgan]

Great. Thank you very much.

[Operator]

Thank you. Our next questions come from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.

[David Begleiter, Analyst at Deutsche Bank]

Good morning. Scott, on EM, you've announced a few price increases. Where do you stand on price costs in Q2, and where do you think it'll be in the back half of the year on price cost in EM?

[Scott Richardson, President and CEO at Celanese]

David, I said on the last call that one of the most important things that we were going to have to get ahead of was the rising raw material costs in engineered materials. The team worked tirelessly to do that through the quarter. We exited Q2, I think, on a really strong level from a price perspective that sets us up. You saw kind of that margin expansion that we were able to get because of pricing that we largely got in the second half of Q2. That positions us to be able to offset a chunk of that raw flow-through that we're now seeing here in the third quarter. I think we said this was going to be a second-half impact from raw materials, and that's definitely what we're seeing with raws. Raws have been a little bit volatile here.

[Scott Richardson, President and CEO at Celanese]

We saw them come down, some raws went back up a little bit. We'll kind of see how this flows through into the fourth quarter, but we're definitely going to see some of that compression relative to Q2 happen in the third quarter as expected.

[David Begleiter, Analyst at Deutsche Bank]

Great. Just on your Q3 guide, what gets you to the top of the range and what gets you to the lower end of the range? Thank you.

[Scott Richardson, President and CEO at Celanese]

David, we've got thousands of million-dollar things that flow through our P&L every single quarter. There's a lot of different elements that can get you to the top or bottom end. Let me talk about kind of where our priorities are, because I think that kind of answers the question. I think, one, it is this, what I just answered. It really is kind of maintaining and being able to hold pricing to be able to offset as much of these raw material inflation that we're going to see in the Engineered Materials business.

[Scott Richardson, President and CEO at Celanese]

Continuing to be able to provide a reliability of supply to our customers in the Western world, really in both businesses, as supply chains have a level of volatility still that are out there, and being able to move a little bit more volume, but also kind of maintain a higher level of margins than we had when we started 2026. I think the third area is continuing to focus on the productivity of the business, really across both of our segments here, and tenaciously working the cost side of that equation. The growth piece is really now we're on a multi-quarter trajectory of being able to drive mix improvement in the Engineered Materials business. We fully expect that that will continue here.

[Scott Richardson, President and CEO at Celanese]

I would say kind of those first three priorities are certainly critical to be able to come in at the higher end of the range.

[David Begleiter, Analyst at Deutsche Bank]

Thank you.

[Operator]

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

[Kevin McCarthy, Analyst at Vertical Research Partners]

Yes, thank you very much, and good morning. Scott, I think you indicated there was still some destocking pressure in the second quarter in the Acetate Tow business. Can you discuss the outlook for the back half there in terms of sales and earnings and the impact of the upcoming closure of Lanaken?

[Scott Richardson, President and CEO at Celanese]

I think the tow business saw some stabilization certainly ahead of the planned Lanaken closure. We saw what I would call a moderation of that destocking in the second quarter. The order patterns certainly are beginning to normalize a bit versus where they were last year. We do expect some level of destocking based upon conversations with customers to continue to occur here in the back half of the year. Certainly that pace of change that we've seen in the business has slowed considerably in tow. We feel good about where that goes as we work our way into 2027 because of the cost actions that we're taking. We expect to have the plant closed here in the quarter, which is faster than we had originally anticipated.

[Scott Richardson, President and CEO at Celanese]

That is going to drive an inventory absorption hit at a higher level in the second half of the year. We felt like that was the right answer because it's going to give us a cleaner 2027, and those costs will certainly get some cost benefit in the fourth quarter. Those costs will certainly be much better in 2027 than they were in 2026.

[Kevin McCarthy, Analyst at Vertical Research Partners]

Very good. As I look at the balance sheet, it strikes me that you've done a nice job of deleveraging pretty consistently over the last five quarters or so. My sense is that you are still evaluating additional opportunities for divestitures, Scott, would welcome any updated thoughts that you might have on that topic, as well as your joint ventures and how you're looking at those strategically. Thanks.

[Scott Richardson, President and CEO at Celanese]

We are committed to the billion-dollar target of divestitures by the end of 2027, Kevin. That hasn't wavered. We are about halfway there after the Micromax transaction we announced last year and closed earlier this year. We're working a portfolio of items of various sizes, to be honest with you, some smaller, some a little bit larger. We believe a combination of those will get us that additional $500 million, and we're still very confident about announcing at least one deal by the end of this year. That's been very consistent for us, and we feel good about how those projects are proceeding.

[Kevin McCarthy, Analyst at Vertical Research Partners]

Thanks very much.

[Operator]

Thank you. Our next question is coming from the line of Frank Mitsch with Fermium Research. Please proceed with your question.

[Frank Mitsch, Analyst at Fermium Research]

Thank you. I want to come back to the third quarter guidance, $135-$175. We're roughly 40% through the quarter. How much visibility do you have on your order books for the balance of this quarter?

[Scott Richardson, President and CEO at Celanese]

I think each business is different, Frank. Acetyls continues to be a couple of weeks of where you can build that confidence on where the order books is. That hasn't changed. It's been pretty consistent for the last several years. In the Engineered Materials business, we have pretty good visibility three, four weeks out. That can also change a bit. I think that's pretty consistent. We have a pretty decent idea how things will finish out through August. September is really important for us. In September, the last month of every quarter tends to be the strongest quarter, particularly in the Engineered Materials business. The team's certainly prepared coming out of what is typically a slower part of the year in August with vacations in Europe as well as in Asia. Is ramping up for a really strong September.

[Scott Richardson, President and CEO at Celanese]

We'll have a lot better idea here in the next two, three weeks, but that's kind of where things stand right now.

[Frank Mitsch, Analyst at Fermium Research]

All right. Understood. Can you speak to the total company turnaround expenses that you faced in the second quarter, and your expectations for the third quarter and fourth quarter for that matter?

[Chuck Kyrish, CFO at Celanese]

Frank, really the biggest turnaround expense in the quarter was engineered materials, right? We talked about $15 million. That obviously will not reoccur. We do have some other smaller turnarounds, but that's the biggest one to sort of highlight. If you think about that, as part of that was some pretty big moves in inventory absorption quarter-over-quarter. EM, if you think about Q1 to Q2, they had to offset about $65 million of total absorption plus turnaround, and still more than offset that obviously by driving margin expansion. I would focus on that POM turnaround, $15 million or so, plus some other small ones.

[Frank Mitsch, Analyst at Fermium Research]

All right. The balance of the year looks relatively clean in terms of turnaround expenses.

[Chuck Kyrish, CFO at Celanese]

Yeah, that's right.

[Frank Mitsch, Analyst at Fermium Research]

Thank you so much, Chuck.

[Chuck Kyrish, CFO at Celanese]

Yep.

[Operator]

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

[Vincent Andrews, Analyst at Morgan Stanley]

Thank you, and good morning. I'm wondering if you could just give us an update on Frankfurt and what your plans are for the asset. It sounds like it'll probably run for the rest of the year at least, just given the ongoing dislocations. Is it part of your broader strategy to sort of maintain some of the share that you've gained this year from a reliability perspective, or what's your overall thought process with that, and I suppose the rest of the footprint?

[Scott Richardson, President and CEO at Celanese]

Yeah, I think the agility that the team showed in Q2 was really strong. The response on Frankfurt, that plant had been down for more than six months. We had to go through and put equipment back into service there. The team was able to get it back up and operating in about five weeks from the time at which we said go. The agility and speed at which they were able to, once we made that decision, get the plant back up and operating, and then move the supply chain around to make sure we had raw materials was a pretty Herculean effort, and I am certainly proud of the group of how they responded. Now as we look forward, Frankfurt will operate depending on where demand is at.

[Scott Richardson, President and CEO at Celanese]

We will match our supply needs, and where the demand is on whether or not Frankfurt operates for the balance of the year or not. We haven't made that decision, because I think a lot depends upon where demand is at and where industry supply ends up landing here in the third and the fourth quarter. That's what we're weighing right now, Vincent. That's no different than past decisions. Frankfurt as well as the Singapore unit are assets that we have been block operating now for several years based upon where our needs are.

[Vincent Andrews, Analyst at Morgan Stanley]

Okay. Thank you. As a follow-up, you outlined all these sort of, I think it was 20 sub-segments within EM that you think you can push further into and that are attractive for a variety of different reasons. Are there any in particular that you feel like you're under-shared in, where you feel like now that you maybe take a more aggressive tact, you'll see sort of a quicker success in, or is it all about the same?

[Scott Richardson, President and CEO at Celanese]

Vincent, you've known us for a long time, one of the mantras we talk a lot here at Celanese is we can always do more. I think, technology and innovation is happening, is moving so rapidly right now that I think it's really irrelevant what our current share and penetration is, because that opportunity set as we go forward is changing so fast. I'll use data centers and servers and data centers as an example here. We've been supplying connectors and other materials into servers for a long period of time. When you break down an AI data center server, it's very different. The chip that's used in each of these servers is extremely expensive.

[Scott Richardson, President and CEO at Celanese]

As they build these things, protecting that chip to ensure that you have protection from signal loss, that you maintain the speed that's required, that you can maintain thermal management through that system, it creates three times the amount of opportunity for our materials in terms of connectors. It creates opportunities around the thermal management system, wire and cable applications. So, it's the multiplying effect of being able to leverage with some of our key customers, where we've historically gone, as they're innovating, it just presents new ground for us to be able to penetrate with our materials. So that's the mindset that we're really driving now with our commercial teams. We had our commercial team leaders into Dallas last month, I got an opportunity to spend with them.

[Scott Richardson, President and CEO at Celanese]

The energy that was there and the accountability that they're driving with their teams around the commitments they're making to really penetrate and drive growth for us is really exciting. It really is a value play, you've seen that come through in terms of the mix enrichment that has been happening now for about a year in the business. We think we can multiply this as we go forward.

[Vincent Andrews, Analyst at Morgan Stanley]

Okay. Sounds great. Thank you very much.

[Operator]

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

[Hassan Ahmed, Analyst at Alembic Global]

Morning, Scott. Scott, you guys mentioned, obviously the lag effect of raw material costs impacting H2. Could you sort of expand on the lag effect of pricing benefits as well? I guess asked a different way, obviously you guys were pretty aggressive with price hikes through the course of Q2, and I would imagine some contracts are a little longer duration. As those contracts reset, I would expect some benefit coming from there. Maybe, what percentage of your EM contracts are longer duration? What percentage of your AC contracts are longer duration? Any sense around that would be great.

[Scott Richardson, President and CEO at Celanese]

Yeah, the acetyl business is a business that moves in real time, Hassan, for the most part. You don't have significant lag effects. Yeah, we saw kind of the peak of raw materials flowing through the Acetyls business really in the first half of Q2. A lot of that lag effect has, I would say, already occurred in the Acetyls business. EM, because the raws tend to sit in inventory longer, we didn't really see much of that flow-through in Q2, and it's really coming through now in the third quarter. I would say the majority of that price, I talked about last quarter, the importance of exiting Q2 at that peak price level, and I feel like we did that.

[Scott Richardson, President and CEO at Celanese]

That's not to say we won't have some lingering effect of a positive price here in the quarter; I would say the majority of it, I think, we've achieved. We'll continue to push there. A lot of it depends upon where scarcity occurs and where we see opportunities and where we're really well positioned. We talk a lot about our global footprint in acetyls, but our engineered materials footprint is extremely geographically diverse as well. Because of our strategy of moving to where compounding is such a critical part of that business and buying more of our polymers versus making with some of the changes we've made in our footprint actions over the last couple of years, that just creates more flexibility and nimbleness for us to be able to be a reliable supplier to our customers in the EM business as well.

[Scott Richardson, President and CEO at Celanese]

we'll continue to look for opportunities on price, but I would say a lot of that I think we achieved coming out of Q2.

[Hassan Ahmed, Analyst at Alembic Global]

Very helpful. As a follow-up, I mean, you guys talked about the restructuring and nylon optimization being around a $50 million annualized benefit, then the Lanaken side of things, another $20 million-$25 million. From a P&L impact perspective, when should we start seeing that benefit? I mean, will we see an element of that benefit in the back half of this year? How does 2027 look with regard to capturing that?

[Chuck Kyrish, CFO at Celanese]

Yeah. Thanks, Hassan. Look, I think the EM footprint actions, think about $30 million-$35 million, then Lanaken $20 million-$25 million. We'll probably get a third or so of the Lanaken cost savings this year and roughly half of the nylon restructuring this year. We'll get the rest of that next year. It really sets us up for lower cost structure in the future, and certainly great for our cash flow.

[Hassan Ahmed, Analyst at Alembic Global]

Very helpful, guys. Thank you so much.

[Operator]

Thank you. Our next question is coming from the line of Matthew DeYoe with Bank of America. Please proceed with your questions.

[Matthew DeYoe, Analyst at Bank of America]

Morning, everyone. On EM growth rates, clearly a fair amount of the discussion, at least on some of the GLP-1 pens. You put out a $500 million TAM, and I appreciate some of this TAM commentary is, how do we think about the ebb and flow there with the pill, the GLP-1 pill kind of coming in? Is that kind of expected in this $500 million range? In autos, Scott, you used to outgrow auto builds pretty consistently, and I know things have changed a bit, with the mix and where the volumes are coming from. But can you take a step back and give us an idea of maybe why the D-cell in autos is now more transferable, or why you're not outgrowing as much as you used to, and if there's a path to getting back to IHS plus growth rates, what is it?

[Scott Richardson, President and CEO at Celanese]

Yeah, thanks for the question, Matt. We've talked now for a while about our focus in engineered materials really being about value over volume. I think, with more polymer capacity coming on in China, our ability to be able to keep up with the pace of growth of standard grade materials, particularly in China, is going to be challenged. We're less focused on the volumetric piece, particularly in automotive. We're more focused on share gains, penetration, and really getting the volume and value in some of the non-auto spaces. I think when we look at the value that we're getting and the mix enrichment, even specifically in the automotive segment, we feel really good about the penetration and the wins that we're seeing there. That, we think, is much more important.

[Scott Richardson, President and CEO at Celanese]

We have now, for the last year and a half, been taking very corresponding actions around our plant footprint to ensure that we've got the right match-up of the capacity needs with where we think the business is going forward. I'm less worried about are we outgrowing auto or not. The key is our revenue really outpacing, and so far, it certainly is. When you look at drug delivery, we're really excited about the trends that we're seeing in drug delivery, and it's bigger than just GLP-1. When you think about patient monitoring and at-home health self-administering that we're starting to see, there is a real growing trend around injectables, but also continuous glucose monitoring continuing to be an important area of growth. I think you're going to continue to see changes.

[Scott Richardson, President and CEO at Celanese]

The growth rates that we called out and the size of markets does contemplate, based upon discussions with our customers, kind of GLP-1 pills and what that means going forward. I think we've got a pretty conservative view there, to be very honest, Matt, and we're going to continue to work. There will be other therapies and treatments that are going to be rolling out here over the next several years, that will be administered at home through injectables beyond GLP-1, and we're excited about the opportunities there also.

[Operator]

Thank you. Our next question is coming from the line of Abigail Eberts with Wells Fargo. Please proceed with your questions.

[Abigail Eberts, Analyst at Wells Fargo]

Hi there. Thanks for taking my question. Looking at your closure in South Korea for EM and then Lanaken and AC, are there other potential candidates for rationalization on your horizon?

[Scott Richardson, President and CEO at Celanese]

Abigail, I repeat what I said earlier, there's always more that can be done. We've talked about three priority actions for us as a company. Increasing the free cash flow of the corporation and aggressively de-leveraging the balance sheet, intensifying our cost improvements, and driving productivity every day. Then driving top-line growth in these sub-segment and pockets of our end markets that are growing and have uniquely higher growth rates and matching that with our own capabilities. That second bucket doesn't ever go away. We've done a lot of the bigger footprint actions, but there's still more that we'll look at, and a lot of depends upon how markets develop, how our position changes, and where we can be successful with our whole value chain. Continuing to strengthen our specialty compounding leadership that we have on a global basis is really the key priority.

[Scott Richardson, President and CEO at Celanese]

Where we get our polymers is going to tweak and change, and making sure we're as efficient with that compounding network as possible. There are additional opportunities. I would say they're probably smaller in nature as we go forward. They're probably more in the $5 million-$10 million per site range. As we work those, we'll certainly talk more and more about it. There are a lot more additional cost improvement things that we're working. We're finding ways at which to be more efficient right now with our supply chain, for example. Now that we've kind of made the footprint actions, we're positioning for growth in a different way.

[Scott Richardson, President and CEO at Celanese]

You have to then reset your supply chain, and we think we can pull costs out over the next several years, not just from an inventory reduction standpoint that Chuck talked about, but also kind of hard costs from our cost to serve and still provide the reliability supply to our customers that they expect. I think it may morph away from plant footprint changes to other kind of efficiency improvements that we have across the network going forward.

[Abigail Eberts, Analyst at Wells Fargo]

Okay. Got it. Thank you.

[Operator]

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

[Laurence Alexander, Analyst at Jefferies]

Good morning. When you look at your full year estimate, what do you think is kind of the embedded net impact of all of the costs around the divestitures, the inventory adjustments, kind of the net working capital swings and absorption that you've had to go through the downtime? Just when we're thinking about what the actual comparable base is for 2027, is it really six or is it a significant difference from that in one direction or the other?

[Chuck Kyrish, CFO at Celanese]

Yeah. Laurence, let me hit some of the business, some of the things that we're going to see this year. If you recall, EM entered this year with the need to offset a variety of headwinds. $45 million of absorption hit from reducing inventory as part of our nylon optimization. $35 million of adjusted EBIT loss from the Micromax divestiture, which was very good for our deleveraging. About $10 million of equity earnings decline really related to the temporary disruptions at Ibn Sina. Despite that, we do expect EM to grow adjusted EBIT at double-digit rates, think closer to 15% than 10%. Really nice job of them offsetting that. In AC, obviously, we've talked about the team pivoting and capturing value from the supply disruptions as the most reliable supplier to drive our Western Hemisphere profitability.

[Chuck Kyrish, CFO at Celanese]

They did also have an incremental $20 million of absorption that'll hit them in the second half. Really great work from the team to drive significant earnings growth on top of that. As I mentioned, I think the working capital, we entered the year with a $100 million target of inventory reduction in engineering materials. That's underway. It's being kind of masked right now by some of the increase in raw material prices that you see flowing through inventory. We think that we'll have a strong year of free cash flow. We'll capture some of that benefit this year and some next year. We enter next year also with, we've laid out the cost reductions on a slide in our presentation. $80 million-$100 million of cost reductions as we go into next year, which will kind of help us offset any change in the business conditions.

[Chuck Kyrish, CFO at Celanese]

I hope that helps with some of the big pieces of how we think about 2026 and going forward.

[Laurence Alexander, Analyst at Jefferies]

Thank you.

[Operator]

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

[Analyst at Mizuho]

Hi, this is Saurabh on behalf of John Roberts of Mizuho on behalf of John Roberts. The first question I have is, do you see the Ibn Sina joint venture gradually ramping as the Strait closure continues, or is it most flatlined until there's significant reopening?

[Scott Richardson, President and CEO at Celanese]

Yeah. The plant is running again. There are sales now happening in the third quarter, so that will yield a higher level of dividend expected into Q4. That, we definitely see a ramping up happening already. Obviously, there is a lot of volatility still in that part of the world, and so we'll have to continue to monitor it. We do expect to see kind of a lift back up in Q4 versus what we have rolling through in the third quarter.

[Analyst at Mizuho]

Got it. I think the second question I have is just the technology roadmap on data centers continuously evolving. In terms of your content, how are you in conversations with your customers in the journey?

[Scott Richardson, President and CEO at Celanese]

We have sales that are happening, it's not just conversations with customers. It's real hardcore, intimate development work that's happening because our customers are trying to innovate. The speed at which the changes are happening and the speed at which the chips are changing is pretty dynamic, it requires us to stay ahead. We're doing new product development in some of our key polymers as well to stay ahead of that we can meet the needs of our customers and what the requirements are. The technical requirements here are hard. They're tough. That is giving us opportunities to be able to bring a much wider solution set to kind of these servers that are supplying into these data centers, thinking broader about data centers in general and thinking about the cooling systems that are going into them.

[Scott Richardson, President and CEO at Celanese]

I think it's just creating a very different discussion with our heritage customers in the electronics end use spaces, also with some new customers that we haven't historically called on. I think we've got, as we said, 30 different sub-segments. There's a number of them that are really specifically focused on kind of this data center build-out because it is really driving strong returns from our customers, we're able to be able to leverage that into wins that are already happening.

[Analyst at Mizuho]

Thank you.

[Operator]

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

[Josh Spector, Analyst at UBS]

Yeah. Hi, good morning. I wanted to ask about some of the corporate cost lines, and I guess I'll apologize in advance since I think these questions have rubbed you the wrong way in the past when I've asked about them. When I look at SG&A and I look at the other activities lines, both of them are up about $30 million in the first half year-over-year. I'm sure some of that's timing and some other moving factors, but I'm curious how you'd expect that to trend into second half. Is there any giveback? Does that come down? I guess, how does this square with some of the functional cost savings you guys are laying out in your slides?

[Chuck Kyrish, CFO at Celanese]

Yeah, Josh, let me talk about other activities because that is definitely running higher in 2026 than it has recently. The primary reason for that is an adjustment that we made to our compensation expense accruals, which was really due to the timing of the change of business conditions and the timing of the increased earnings forecast during the year. I would say compensation expense is higher than average this year. It was lower than average last year, which also helps explain the year-over-year change. Going forward in other activities, I would think about that as roughly $75 million a quarter after 2026. Recognizing there's a number of things in there that can cause some variability, I think the $75 million a quarter after 2026 is a good place to start.

[Josh Spector, Analyst at UBS]

Maybe that's then related. Is that the same thing that's impacting SG&A then? We'd expect that to go up, and then that's the right pace into next year?

[Chuck Kyrish, CFO at Celanese]

Yeah. That's a lot of it.

[Josh Spector, Analyst at UBS]

All right. Thank you.

[Chuck Kyrish, CFO at Celanese]

Yep.

[Scott Richardson, President and CEO at Celanese]

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

[Operator]

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

[Arun Viswanathan, Analyst at RBC Capital Markets]

Thanks for taking my question. Hope you guys are well. Maybe I can ask the medium-term earnings question slightly differently. I think when you went into Q2, you were thinking about $3 for the back half of 2026. It seems like maybe there was a slight outperformance in Q2 at that $245, but you're still kind of targeting $6 for the year. Chuck, you ran through some of the puts and takes on a one-time front. Also as you look into Q2, obviously there's normalization on methanol and some other drivers. When you put all that together, it seems like 2027 could maybe be in a similar range of $6. Do you see the one-time add backs and maybe some of the other cost reductions more than offsetting the methanol and other kind of price upside that you saw this year?

[Chuck Kyrish, CFO at Celanese]

Yeah, Arun, I think the objective is we've taken action for $80 million-$100 million of cost reductions for next year, right? The objective is to offset any changes in further moderation in business conditions for next year. We've got a lot to do. We'll know a little bit more later in the year. With these actions we've taken, $80 million-$100 million, we'll continue to look for more and continue also to drive growth in engineering materials, right? We haven't talked about 2027 yet, but certainly we're taking actions to drive that as high as we can going forward.

[Arun Viswanathan, Analyst at RBC Capital Markets]

Just on that note, as a follow-up, would you be aggressively taking actions to accomplish even more aggressive deleveraging if business conditions continue to moderate? Is the objective to be below or three times eventually or how does that kind of relate to the deleveraging plan? Thanks.

[Scott Richardson, President and CEO at Celanese]

Yeah, Arun, let me start and I'll turn it over to Chuck to talk about long-term deleveraging. The three priorities I talked about earlier are going to continue to be our focus areas. Increase cash flow. Drive as much cash flow as we possibly can. I think what we've proven out over the last year as well as so far this year, and what Chuck talked about on kind of a baseline that we're going to build off of $700 million-$800 million of cash flow going forward, we feel like our ability to generate cash here at Celanese is strong, and we can build on that and grow it. That's going to come from continuing to drive aggressive cost reduction activities, productivity every single day.

[Scott Richardson, President and CEO at Celanese]

The last is really kind of adding this top-line growth piece and the focus really around the value opportunities in engineered materials. We haven't talked on the call really about the opportunities in acetyls, but in our emulsions and redispersible powders business there are some applications, albeit small, but they're starting to really grow where we have unique chemistry advantages in areas like tile adhesive, in insulation systems, some of the evolving waterproofing technologies that we're seeing. The chemistries that we have are providing unique solutions to our customers there, and we're spending a lot of time and effort on really trying to expand these and make sure that we're well-positioned to really help drive some of that growth going forward that's going to be unique to Celanese.

[Scott Richardson, President and CEO at Celanese]

I think what that does is it yields more and more cash every single year to deleverage the balance sheet and give us more flexibility going forward.

[Chuck Kyrish, CFO at Celanese]

Yeah. That's right. The aggressive actions are what Scott's talked about, driving free cash flow, executing smart divestitures. I would point you to what we've laid out in terms of our net debt. We're going to finish this year around $10 billion. Next year, feel really good about finishing it at $9 billion, right? Making very good progress. The other side of the equation is EBITDA. If we can drive EBITDA growth, that will even speed that further. We still think about the long-term leverage for this balance sheet around 3x net debt to EBITDA. We're going to cross 5x this year, and the next threshold we're shooting for is to get to 4x, right? As we drive to that long-term leverage target, that's our focus area, and driving our own free cash flow and executing these smart divestitures.

[Arun Viswanathan, Analyst at RBC Capital Markets]

Thanks.

[Scott Richardson, President and CEO at Celanese]

Well, thank you. 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 so much. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Participants

Executives

• Bill Cunningham, VP of Investor Relations
• Scott Richardson, President and CEO
• Chuck Kyrish, CFO

Analysts

• Patrick Cunningham, Analyst at Citi
• Ghansham Panjabi, Analyst at Baird
• Jeff Zekauskas, Analyst at J.P. Morgan
• David Begleiter, Analyst at Deutsche Bank
• Kevin McCarthy, Analyst at Vertical Research Partners
• Frank Mitsch, Analyst at Fermium Research
• Vincent Andrews, Analyst at Morgan Stanley
• Hassan Ahmed, Analyst at Alembic Global
• Matthew DeYoe, Analyst at Bank of America
• Abigail Eberts, Analyst at Wells Fargo
• Laurence Alexander, Analyst at Jefferies
• Analyst at Mizuho
• Josh Spector, Analyst at UBS
• Arun Viswanathan, Analyst at RBC Capital Markets