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Shares in chemicals and specialty materials company Celanese (NYSE: CE) slumped by 22.7% in the week to Friday morning. The move follows a disappointing set of fourth-quarter earnings released on Tuesday. In addition, investors were left unimpressed by management's guidance for 2025.
Celanese disappoints the market
Chemical companies are often highly cyclical. Weak demand conditions can lead to volume deterioration and a pricing slump, rapidly reducing earnings.
That's pretty much what happened with Celanese in the fourth quarter. A 7% volume decline, a 2% pricing decline, and a 1% reduction from currency movements led to a 10% decline in sales. The ensuing margin reduction led to a year-over-year decline in adjusted earnings before interest and taxation (EBIT) from $434 million in the fourth quarter of 2023 to $333 million in the fourth quarter of 2024.
Celanese makes engineered polymers and acetyl products used across swathes of the industrial sector, including construction, automotive, electronics, paints, and consumer products. Many of these markets, notably automotive and consumer electronics, have been hit particularly badly by the slowdown in the industrial sector over the last couple of years.
That's not been good news for its acquisition of DuPont's mobility & materials business (completed in late 2022) for $11 billion. The acquisition increased Celanese's exposure to these end markets but has disappointed almost since its completion.
Where next for Celanese
Management doesn't expect any near-term respite. CEO Scott Richardson expects "weakness in core end-markets like automotive, construction, paints, coatings, and industrial."
That said, the company is still profitable, cash-generative, and trading on 9 times expected 2025 earnings; it's a decent value stock candidate for investors with a tolerance or near-term risk.
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