Celanese Corporation (NYSE:CE) Q4 2022 Earnings Call Transcript

Lori Ryerkerk: Yes, so we’re assuming our 2023 forecast is basically assumes flat in ’23 to the second half of 2022. So that’s kind of like at an $85 million range, which really aligns pretty well with the IHS outlook this year, which they’re forecasting an increase of 3.6%. That is almost exactly the same number. And that really is assuming U.S. and Europe, about 5% up; Asia, up about 2%, with China being the weakest point at 1%. Still I would say we’re still about 5% lower than 2019. But we do believe that, that we’re pretty consistent with IHS in this. We believe auto builds are going to be constrained by chip availability, not by demand. We think the pent-up demand is still there. And so to the extent chips would be more available, I think autos will build – other years as we’ve seen sometimes they’re not as available and – but we’re assuming kind of flat to second half 2022.

I would say our – we would expect our contribution ourselves into auto to be maybe a couple of percent above that. And that’s based upon a few things. One is the locations where we’re stronger. So historically, we’ve been stronger in the U.S. and EU. Now with M&M, they’ve always been a bit stronger in Asia. But even having said that, I think we think we’d be a few percent above that. The other thing is the presence that we have in electric vehicles. I mean, we – over 10% of our sales by volume go into electric vehicles from the Heritage EM portfolio. And we continue to see that EVs are growing at a faster rate than ICE if you look at the forecast going forward so based on that, I would assume a couple of percent kind of low single-digit percent that we would expect to be over the build rate in terms of our auto growth.

Frank Mitsch: Got you, thank you. And I know — maybe a question for Scott. I know that the comment was the M&M inventory levels were really high and elevated given the take-or-pay contracts ended the year at $2.8 billion in terms of your inventories. How should we think about that — the impact of maybe inventory reduction on working capital in ’23?

Scott Richardson: Yes as I said earlier, Frank, on the free cash flow question, we’d like to see at least a $200 million reduction, which will largely come out of inventory as we work through the year. I mean, that’s going to largely be dependent on a few things: one, being able to bring absolute volumes down; two, depending on what were to transpire with raw materials. And I think with energy and gas already coming down, that will give us some wind at our back. But we really would like to see the volumetric reduction kind of contribute to that $200 million in total and then any pricing reduction be on top of that. So we’re kind of hoping and planning for that $200 million reduction right now.

Frank Mitsch: Thank you so much.

Operator: Thank you. Your next question today is coming from Matthew DeYoe from Bank of America. Your line is now live.

Matthew DeYoe: Good morning, everyone. I know you adjusted term loan covenants, but do you still have to hit the 3x net debt to EBITDA by year-end 2024 that was stipulated by the rating agencies? And look, can I just use consensus EBITDA and hand up for well be wrong, But like you gave yourself some cumulative cash flow generation, which over the next two years, but that consensus EBITDA puts you like 3.5, 3.3. So is there a concern internally about this? And do you start thinking about other asset sales? Is that necessary?