Celanese Corporation Reports Record Second Quarter Results; Reaffirms 2008 Outlook

21 July 2008 - Celanese Corporation today reported record net sales of $1,868 million, a 20 percent increase from the prior year's results, as higher pricing on continued strong demand, positive currency impacts, and higher volumes associated with the company's growth strategy in Asia, all contributed to strong top-line growth.

Operating profit more than doubled to $207 million from $71 million in the prior year period. The company’s growth in Asia and certain advantaged raw material positions helped to mitigate the impact of significantly higher overall raw material and energy costs. Last year’s results included $105 million of other expenses primarily related to a long-term management compensation program and also included the impact of the unplanned outage at the company’s Clear Lake, Texas, facility. Net earnings were $134 million compared with a loss of $117 million in the same period last year. The second quarter 2008 results included approximately $69 million in net losses from discontinued operations, principally related to a previously announced litigation settlement. The 2007 results included the impact of the company’s debt refinancing transaction, which was completed in April 2007.

Adjusted earnings per share for the second quarter were $1.20, a 41 percent increase over the prior year period, reflecting strong volume and pricing on continued strong demand, as well as increased dividends from the company’s strategic affiliates. This quarter’s results excluded approximately $24 million of certain other adjustments, primarily related to the company’s revitalization activities. Operating EBITDA increased to a record $406 million, up 24 percent from last year.

“We delivered record second quarter earnings despite challenging global economic conditions and significant inflation in raw material and energy pricing,” said David Weidman, chairman and chief executive officer. “Once again, our results demonstrate the strength and earnings power of Celanese’s attractive portfolio of businesses.”

Recent Highlights

• Successfully started up its newly constructed 20,000 ton GUR^® ultra-high molecular weight polyethylene (UHMW-PE) facility, 100,000 ton acetic anhydride facility, and 300,000 ton vinyl acetate monomer facility, all located at the company’s integrated chemical complex in Nanjing, China.
• Signed an agreement to establish a 20,000 square-meter commercial and technology center in Shanghai. Expected to be completed in early 2010, the new center will combine the headquarters for Celanese’s Asia businesses, customer application development and research and development facilities.
• Celanese’s Nutrinova business and BRAIN AG, a leading European biotech company, identified all-natural compounds for high intensity sweeteners and sweetness enhancers.
• Introduced EcoVAE™, a new vinyl acetate/ethylene (VAE) emulsion technology specially designed to facilitate the manufacture of high quality, eco-friendly paints for North America.
• Resolved a legacy litigation matter by entering into a settlement agreement relating to sales by the polyester staple fibers business, which Hoechst AG sold to KoSa, Inc. in 1998.
• Announced intent to divest ownership interest in legacy Infraserv investments located in Knapsack, Gendorf, and Wiesbaden, Germany, where Celanese no longer has manufacturing operations.

Second Quarter Segment Overview

Advanced Engineered Materials

Advanced Engineered Materials continued to execute its growth strategy, as global expansion offset the impacts of ongoing challenges in the U.S. automotive sector and initial signs of weakness in the European sector. Net sales increased to $300 million from $257 million in the same period last year, primarily on positive currency impacts, as well as higher volumes, particularly in Asia. Operating profit increased to $37 million from $32 million in the prior year period, as increased volumes and lower overall expense more than offset significantly higher raw material and energy costs, including ethylene and other petroleum-based feedstocks. Operating EBITDA, however, was $68 million compared with $70 million in the same period last year, mainly due to lower earnings from equity affiliates.

Consumer Specialties

Consumer Specialties continued to contribute stable earnings, driven by its expansion in Asia and successful integration of its acquired Acetate Products Limited (APL) business. Net sales increased to $292 million compared with $281 million in the same period last year, driven by higher pricing on continued strong demand and positive currency impacts. Higher acetate tow volumes helped to offset lower acetate flake volumes resulting from the company’s strategic decision to shift flake production to its expanded acetate China ventures, and slightly lower volumes for Sunett®, the company’s high-intensity food sweetener business. Operating profit was $46 million, $2 million lower than last year’s results, as the higher pricing could not fully offset significantly higher raw material and energy costs in the period. Operating EBITDA increased to $107 million from $104 million in the same period last year, however, on higher dividends from the company’s China ventures.

Industrial Specialties

Continued revitalization of the Industrial Specialties businesses delivered improved results, despite continued softness in certain markets and significantly higher raw material costs. Net sales increased to $386 million from $355 million in the same period last year, primarily driven by higher pricing related to increased raw material costs, as well as favorable currency impacts. Increased volumes related to the company’s strategic expansion in Asia were offset by volume declines in North American and southern European painting and coating applications. Operating profit increased to $20 million, compared with a loss of $1 million in the prior year period, as higher pricing more than offset higher raw material costs and the lower volumes. The 2007 results included approximately $19 million of expense related to the company’s revitalization activities. Operating EBITDA was $37 million compared with $34 million in the second quarter of 2007.

Acetyl Intermediates

Strategic expansions in Asia, attractive industry fundamentals, and advantaged raw material positions drove significant sales and earnings growth in Acetyl Intermediates. Net sales were $1,067 million compared with $829 million in the same period last year, driven by higher pricing on continued strong demand, increased volumes from its Nanjing acetic acid unit, and positive currency impacts. Operating profit increased to $148 million from $91 million and operating EBITDA increased to $227 million from $148 million in the same period last year, as the volume and pricing more than offset higher raw material and energy costs in the period. Increased dividends from the company’s Ibn Sina methanol and MTBE cost affiliate also contributed to the improved results. The prior year’s operating results included a partial impact of the unplanned outage at the company’s Clear Lake, Texas, facility.

Taxes

The tax rate for adjusted earnings per share was 26 percent in the second quarter of 2008 compared with 28 percent in the second quarter of 2007. The U.S. GAAP effective tax rate for continuing operations for the second quarter of 2008 was 18 percent compared with 26 percent in the same period last year. The decrease in the U.S. GAAP effective tax rate for the period ended June 30, 2008 was primarily due to the U.S. income tax effect resulting from the maturity of cross currency swap arrangements in June 2008. The tax rate for adjusted earnings per share is based upon the company’s previous guidance which did not include these items. Cash taxes for the first six months of 2008 were $45 million, $96 million lower than the prior year period.

Equity and Cost Investments

Earnings from equity investments and dividends from cost investments, which are reflected in the company’s adjusted earnings and operating EBITDA, totaled $92 million in the second quarter versus $72 million in the same period last year. Higher dividends from the company’s acetate China ventures and Ibn Sina cost affiliate offset lower earnings from the Advanced Engineered Materials equity affiliates. Equity and cost investment dividends, which are included in cash flows, were $87 million compared with $59 million in the prior year period.

Cash Flow

The company generated $346 million in cash from operating activities during the first six months of 2008 compared with $79 million generated during the same period last year, driven by strong operating performance and lower cash taxes. The 2008 results included a $107 million payment related to the resolution of a legacy litigation matter and an increased use of cash in trade working capital. The 2007 results included a $74 million cash payment related to a long-term management compensation program.

Cash used in investing activities was $33 million at the end of the second quarter and included a $93 million payment to settle a cross currency swap that matured in June 2008.

During the first half of 2008, the company repurchased approximately $126 million of its outstanding common shares and has approximately $274 million in authorized purchases remaining. Net debt at the end of the second quarter was $2,640 million, a decrease of $91 million from the fourth quarter of 2007. Cash and cash equivalents at the end of the second quarter were $983 million compared with $825 million at the end of 2007.

During the quarter, the company received a scheduled progress payment of $311 million related to the relocation of Ticona’s Kelsterbach production facility, reflected in investing activities; and $59 million in associated value added tax, reflected in operating activities.

Outlook

The company reaffirmed its full year outlook for adjusted earnings per share to between $3.60 and $3.85 based on the strength of its performance in the first half of 2008 and continued execution of its earnings growth strategy. On a comparable basis, 2007 results were $3.29 per share. The guidance is based on an adjusted tax rate of 26 percent and an estimated year-end weighted average of 166 million diluted shares outstanding. The company also reaffirmed its operating EBITDA guidance range of between $1,355 million and $1,415 million.

“The rapid escalation of raw material and energy prices, along with concerns of slowing economic growth in the U.S. and parts of Europe have created challenges in the short-term,” said Weidman. “With our geographic and end market diversity, advantaged feedstock positions, and an integrated business model, we believe that Celanese is well-positioned to mitigate the potential impact of today’s environment.”