In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers toCelanese Corporation , aDelaware corporation, and not its subsidiaries. The terms the "Company," "we," "our" and "us," refer toCelanese and its subsidiaries on a consolidated basis. The term "Celanese US " refers to the Company's subsidiary,Celanese US Holdings LLC , aDelaware limited liability company, and not its subsidiaries. The following discussion should be read in conjunction with theCelanese Corporation and Subsidiaries consolidated financial statements as of and for the year endedDecember 31, 2019 filed onFebruary 6, 2020 with theSecurities and Exchange Commission ("SEC") as part of the Company's Annual Reporting on Form 10-K ("2019 Form 10-K") and the unaudited interim consolidated financial statements and notes to the unaudited interim consolidated financial statements, which are prepared in accordance with accounting principles generally accepted inthe United States of America ("US GAAP"). Investors are cautioned that the forward-looking statements contained in this section and other parts of this Quarterly Report involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See "Forward-Looking Statements" below and at the beginning of our 2019 Form 10-K. Forward-Looking Statements Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and other parts of this Quarterly Report contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. Generally, words such as "believe," "expect," "intend," "estimate," "anticipate," "project," "plan," "may," "can," "could," "might," and "will," and similar expressions, as they relate to us are intended to identify forward-looking statements. These statements reflect our current views and beliefs with respect to future events at the time that the statements are made, are not historical facts or guarantees of future performance and involve risks and uncertainties that are difficult to predict and many of which are outside of our control. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. All forward-looking statements made in this Quarterly Report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this Quarterly Report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise. COVID-19 Update OnMarch 11, 2020 , theWorld Health Organization declared the outbreak of a novel coronavirus ("COVID-19") as a pandemic, which originated inChina and has spread throughout the world to substantially all locations where we have offices, production facilities, customers and suppliers, creating a dynamic and challenging situation worldwide. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home restrictions, travel restrictions and other public health safety measures. Our employees' health and well-being continue to be of vital importance. We have implemented contingency planning, and employeeswho can work remotely are doing so from their homes to a significant extent. For employeeswho are considered essential and are working in plants, we have implemented government recommended protocols and best practices related to social distancing and best hygiene practices, including the use of additional personal protective equipment and enhanced cleaning protocols, where appropriate. We have also restricted visitor access and non-essential business travel. We have a global crisis team in place monitoring the evolving situation and recommending risk mitigation actions, including workplace health and safety measures. We also have site activation teams at all locations to guide and implement our careful return-to-office efforts in accordance with government regulations and recommended protocols. Our presence inChina provided us with an advance view of how COVID-19 scenarios can unfold as well as the importance of taking early action. We operate within a geographically-balanced global footprint and have the ability to utilize different production and distribution strategies depending on the business and product to satisfy customer demands. We continue to pursue our existing operational strategy. Since our industry is considered essential by the local governments in the majority of the areas we operate, most of our plants continue to be operational, and we have been able to maintain a largely consistent supply chain. However, as customer demand has weakened, we have temporarily reduced run rates at, and in some instances temporarily idled, certain of our plants to reduce costs and inventory levels. During the three and six months endedJune 30, 2020 , the effects of COVID-19 and related actions to control its spread had a significant, negative impact on the operating results of our Engineered Materials and Acetyl Chain segments, as discussed in more detail in the individual reporting segment sections below. We expect the 43
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declines in consumer demand, particularly in the Western Hemisphere, to continue to work through the relevant value chains through the second half of 2020. In Engineered Materials, our most impacted end markets reflect a significant decrease in big-ticket discretionary spending among consumers for items such as automobiles, electronics and appliances, as well as reduced spending on materials for industrial and construction applications and in medical applications, due to the delay in elective surgeries. Other application areas including food and beverage, pharma and 5G infrastructure are more resilient. In the Acetyl Chain, we benefit from a highly diversified set of end-uses with less exposure, relative to others in the industry, to end markets that have been most acutely impacted by COVID-19, like automotive. However, the historically low acetic acid pricing, along with the recent developments with global oil markets, continue to present a deflationary environment for the Acetyl Chain business. At the same time, we see resiliency and even growth in some applications within all of our segments, including packaging, hygiene products, disinfectants, pharma and cigarettes. We anticipate that our operations will continue to be negatively impacted on a short-term basis. We currently anticipate that customer demand and our results of operations should begin to normalize in 2021, absent a similar resurgence of COVID-19 and as the economies in which we operate begin to recover. We have taken, and will continue to take, actions to mitigate the impact of COVID-19 on our results of operations, financial condition and cash flow. Through the capacity reductions we have implemented at our plants, we are managing inventory levels, reducing our manufacturing costs and optimizing our working capital. We have reduced discretionary spending such as travel and other corporate functional expenses. Although significant layoffs have not occurred within the Company during the three and six months endedJune 30, 2020 , some positions have been eliminated under a global restructuring program implemented largely as a result of cost cutting initiatives due to the current global economic environment. We have also engaged in temporary, targeted furloughs where plant operations have been reduced. We are actively managing our business to maintain cash flow, and we believe that liquidity from (i) cash generated from operations; (ii) cash on hand; (iii) dividends from our portfolio of strategic investments; and (iv) cash available from our senior unsecured revolving credit facility and our accounts receivable securitization facility, will be sufficient to meet our operational and capital investment needs and financial obligations for the foreseeable future. We remain in compliance with the financial covenants under our senior unsecured revolving credit facility and short-term bilateral term loans and expect to remain in compliance based on our current expectation of future results of operations. To preserve our cash balances and maintain liquidity, we have reduced our capital expenditures forecast from$500 million to less than$350 million for the full year 2020, prioritizing those projects that continue to drive productivity for us in the near-term. We remain fully committed to our current cash dividend. During the three months endedJune 30, 2020 , we temporarily paused share repurchases and will maintain current liquidity levels before deploying any discretionary operating cash flow for such share repurchases. The extent to which COVID-19 will adversely impact our business, financial condition and results of operations will depend on numerous evolving factors, which are highly uncertain, rapidly changing and cannot be predicted. For further information regarding the impact COVID-19 could have on our business, financial condition and results of operations, see Part II - Item 1A. Risk Factors. For further discussion of our liquidity condition, see Liquidity and Capital Resources in this Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Risk Factors See Part I - Item 1A. Risk Factors of our 2019 Form 10-K and subsequent periodic filings we make with theSEC for a description of certain risk factors that you should consider which could significantly affect our financial results. In addition, the following factors could cause our actual results to differ materially from those results, performance or achievements that may be expressed or implied by such forward-looking statements. These factors include, among other things: • changes in general economic, business, political and regulatory conditions in
the countries or regions in which we operate;
• the length and depth of product and industry business cycles particularly in
the automotive, electrical, textiles, electronics and construction
industries;
• changes in the price and availability of raw materials, particularly changes
in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources;
• the ability to pass increases in raw material prices on to customers or
otherwise improve margins through price increases;
• the ability to maintain plant utilization rates and to implement planned
capacity additions, expansions and maintenance; 44
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• the ability to reduce or maintain current levels of production costs and to
improve productivity by implementing technological improvements to existing
plants;
• increased price competition and the introduction of competing products by
other companies;
• the ability to identify desirable potential acquisition targets and to
consummate acquisition or investment transactions, including obtaining
regulatory approvals, consistent with our strategy;
• market acceptance of our technology;
• the ability to obtain governmental approvals and to construct facilities on
terms and schedules acceptable to us;
• changes in applicable tariffs, duties and trade agreements, tax rates or
legislation throughout the world including, but not limited to, adjustments, changes in estimates or interpretations that may impact recorded or future tax impacts associated with the Tax Cuts and Jobs Act (the "TCJA");
• changes in the degree of intellectual property and other legal protection
afforded to our products or technologies, or the theft of such intellectual
property;
• compliance and other costs and potential disruption or interruption of
production or operations due to accidents, interruptions in sources of raw materials, cyber security incidents, terrorism or political unrest, public health crises (including, but not limited to, the COVID-19 outbreak), or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war or terrorist incidents or as a result of weather, natural disasters, or other crises including public health crises;
• potential liability for remedial actions and increased costs under existing
or future environmental regulations, including those relating to climate
change;
• potential liability resulting from pending or future claims or litigation,
including investigations or enforcement actions, or from changes in the laws, regulations or policies of governments or other governmental activities, in the countries in which we operate;
• changes in currency exchange rates and interest rates;
• our level of indebtedness, which could diminish our ability to raise
additional capital to fund operations or limit our ability to react to
changes in the economy or the chemicals industry; and
• various other factors, both referenced and not referenced in this Quarterly
Report.
Many of these factors are macroeconomic in nature and are, therefore, beyond our control. In addition, COVID-19 and responses to the pandemic by governments and businesses, have significantly increased financial and economic volatility and uncertainty, exacerbating the risks and potential impact of these factors. Should one or more of these risks or uncertainties materialize, affect us in ways or to an extent that we currently do not expect or consider to be significant, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Quarterly Report as anticipated, believed, estimated, expected, intended, planned or projected. We neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates. Overview We are a global chemical and specialty materials company. We are a leading global producer of high performance engineered polymers that are used in a variety of high-value applications, as well as one of the world's largest producers of acetyl products, which are intermediate chemicals, for nearly all major industries. As a recognized innovator in the chemicals industry, we engineer and manufacture a wide variety of products essential to everyday living. Our broad product portfolio serves a diverse set of end-use applications including automotive, chemical additives, construction, consumer and industrial adhesives, consumer and medical, energy storage, filtration, food and beverage, paints and coatings, paper and packaging, performance industrial and textiles. Our products enjoy leading global positions due to our differentiated business models, large global production capacity, operating efficiencies, proprietary technology and competitive cost structures. Our large and diverse global customer base primarily consists of major companies across a broad array of industries. We hold geographically balanced global positions and participate in diversified end-use applications. We combine a demonstrated track 45
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record of execution, strong performance built on differentiated business models and a clear focus on growth and value creation. Known for operational excellence, reliability and execution of our business strategies, we partner with our customers around the globe to deliver best-in-class technologies and solutions.
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