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Celanese’s (NYSE:CE) stock dropped as much as 23% on Wednesday, a day after the maker of specialty materials and chemicals reported a quarterly loss. The company is grappling with weak demand from the automotive, paints and industrial sectors that is expected to last into 2025.
“It appears Celanese (NYSE:CE) is still reducing capacity to match current demand by idling capacity/drawing down inventories, which is likely the main headwind to first-quarter guidance,” Arun Viswanathan, analyst at RBC Capital Markets, said in a February 18 report after Celanese (CE) reported results. “As such, we think earnings could be pressured in the first half of 2025 given overcapacity in autos and potential exposure to weaker regions.”
A key issue for investors will be identifying a catalyst to help improve the value of the shares, another analyst said.
“Absent a significant macro industrial recovery, asset divestiture is the key that could unlock a step-change in the leverage profile but with internal processes likely on-going we expect little incremental on this front,” Eric Boyes, analyst at financial-services firm Evercore ISI, said in a note to clients.
Losses on lower revenue
For the three-month period ended in December, Celanese (CE) swung to a loss of $1.91 billion from a profit of $701 million a year earlier.
Revenue slumped 8% to $2.37 billion, in line with the average estimate among analysts surveyed by S&P Global Intelligence. Celanese (CE) blamed the drop on declines product prices and sales volume, along with foreign currency moves.
The automotive and industrial sectors cut inventory in engineered materials, hurting fourth-quarter financials, according to Celanese (CE). The company lowered expenses and adjusted its output to match weaker demand, which pressured its working capital.
Weakness in demand and pricing are expected to continue into 2025, management said said. Celanese (CE) forecast earnings in the first quarter to be $0.25 to $0.50 a share amid soft demand. Second-quarter earnings are estimated at about $1 a share higher than the first quarter, according to the company.
Celanese (CE) plans to close its Luxembourg Mylar Specialty Films manufacturing site, which it co-owns with Teijin, to reduce expenses.
"With little indication of near-term recovery, it is our job to drive productivity and earnings growth at Celanese even if fundamental demand remains flat or declines further," Scott Richardson, chief executive since January, said in a statement.
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