The operator introduces the Celanese Corporation's first quarter 2024 Earnings Conference Call and Webcast, reminding participants that the call is being recorded. The host, Bill Cunningham, introduces the CEO, COO, and CFO and directs listeners to the company's website for non-GAAP financial measures and forward-looking statements. The operator then opens the call for questions from Ghansham Panjabi with Baird.

Lori Ryerkerk discusses the current global macroeconomic landscape, stating that there have been no significant changes from previous quarters. De-stocking has ended and the order book remains stable. China is steady, but exports to Europe and other regions are lagging. The US is steady across all sectors, while Europe remains lackluster. There has not been the expected seasonal uplift in the first and second quarters. Construction, paints, and coatings continue to have poor demand, but there may be improvement in the second half. PPG has reported 11 quarters of flat to down.

The speaker discusses their company's expectations for growth in the second quarter, which they hope will lead to a recovery in the second half. They mention that people are still spending on experiences and travel, but not on goods yet. They believe that demand will eventually normalize, but it has not happened yet. They also mention that a key factor in kickstarting demand will be when people become confident in the economy again. They also address the disruption caused by new capacity in China, which has been more disruptive than initially thought due to weaker demand.

The speaker is confident that the company will reach its full year guidance numbers through controllable actions. Synergies from M&M assets and other actions taken last year will compound throughout the year. The expansion at Clear Lake will also contribute to growth. Debt service and turnaround costs will also provide tailwinds in the second half of the year.

The speaker discusses the company's outlook for the full year and expresses confidence that they will meet their goals. They also mention continued pricing pressure in the engineering materials sector and a focus on improving mix to address this. When asked about the decrease in engineered materials volumes compared to global auto production and coatings demand, the speaker explains that this is due to a mismatch in pricing and cost structure and that the team is working to address this through mix upgrades.

Chuck Kyrish and Jeff Zajkowski discuss the drivers behind the increase in inventory levels and seasonality in the medical sector. They also mention the acetyl chain, where volumes are up 11% due to the Clear Lake expansion, but this is not a deliberate strategy. They also mention the strong numbers in filter tow and how first quarter volumes were within typical seasonality.

In the second quarter, EM volumes are expected to be down year-over-year, but will improve slightly compared to the first quarter. In the third and fourth quarter, volumes are expected to increase, but any differences will be due to mix-related factors. This is due to efforts to reduce inventory levels in the previous year. Overall, volumes are expected to increase in the second half of the year.

The company expects an increase in volume in the second half of the year due to de-stocking ending and a commercialization of their pipeline. They anticipate their engineer materials business to contribute at the same level as their Acetyl business in the next year, with margin growth of around 10%. There is no specific growth target for the business, but it is expected to continue growing. There have been reports of trade complexities in the Red Sea area resolving themselves.

Lori Ryerkerk, CEO of Celanese, states that the company has been indifferent to the challenges in shipping channels and subway disruptions. They do not expect a big impact if these issues are resolved as the market is quick to correct itself. In regards to the nylon business, there will be higher variable costs for higher-velocity products due to the flow-through of methanol costs. In response to a question about the price-to-cost benefit in the first half, Scott Richardson, CFO, states that it will depend on the development of raw materials in the second half.

The company's synergy drivers for engineered materials are the shutdown of Nylon 66 in Germany and the SAP ramp. These actions are expected to result in a $50 million synergy lift for the full year. The direct impact of the SAP ramp will also result in getting rid of the TSA, but the company has had to add its own people.

The company is seeing benefits from having all their data in one system, which is helping with planning and forecasting. They expect a 150 lift from last year due to this. The cash flow outlook for 2024 is expected to be similar to last year, with a focus on generating a working capital benefit. However, there may be some timing issues with cash taxes in 2024. Last year, the company saw a significant benefit from reducing inventory, but this year, they expect a smaller benefit in working capital.

The company expects to have about $300 million in total this year, which is $75 million higher than last year. They will have a one-time tax payment of $90 million in the second quarter, but expect to recoup it in the future. Three-quarters of the cash tax will be in the first half of the year. Synergy costs will be between $100-150 million, which is higher than last year. Cash interest will be lower by $50 million and CapEx will be $100-150 million lower than last year. The company is satisfied with their current asset yields and does not plan on any further rationalization.

The company has been focusing on building its downstream operations, with recent announcements about new facilities and debottlenecking efforts. They are aiming to stabilize their earnings from asset yields, particularly in the acetic acid market. The company's footprint is well-suited for their needs, but they are always looking for opportunities to improve. In terms of outperforming their end markets, they rely on their pipeline of projects, which has remained consistent since their acquisition of M&M one year ago.

The value of the projects being generated is strong and there has been a 20% increase in revenue opportunity per sales employee compared to the previous year. The company has been working on integrating their business and stabilizing their inventories. In the first quarter, volume was as expected and the order book for the second quarter is in line with the company's guidance.

During a conference call, the company's executives discussed their comfort with the prepared comments and their thoughts on the second half of the year and 2025. They mentioned a potential annualized EPS of $13.25 for the second half and stated that this was a reasonable starting point for 2025. They also addressed a competitor outage in the Acetyl market, stating that it had a small and short-lived impact on pricing. Finally, they discussed the M&M synergies for the quarter, but did not provide a specific number.

The company is not able to provide an exact number for Q2 but expects the numbers to increase as the year progresses. They are still expecting a benefit of around $100 million to $110 million in the back half of the year due to lower raw material costs. In the Acetyl chain business, the impact of new capacity in the market is being felt and the company is hoping for an improvement in demand. They are also exploring other ways to increase profitability in this segment.

John Roberts from Mizuho asks about the sequential change in earnings for Eastman Chemical Company. He notes that nylon earnings were up while other plastic earnings were down. He asks for clarification on the decline in other plastic earnings, whether it was due to a downturn or price pressure.

Scott Richardson and John Roberts discuss the seasonality of medical business and the potential for expansion in Singapore to meet the growing demand in India. They mention that the VAE expansion in Singapore will also help meet demand in Southeast Asia and India.

The speaker discusses the company's ability to shift their network to meet growing demand for their products in the VAE market. They also address potential concerns about labor and transportation costs, stating that they have managed these pressures through productivity measures. The speaker also mentions that there is currently an excess supply of acetic acid in China, but expects this to be resolved in the next few quarters, depending on consumer spending and economic confidence.

The speaker expects new capacity to start up in the future, but it is uncertain whether it will run at full capacity or just replace existing capacity. There are also new uses for acetic acid in China that could take up some of this capacity. It may take several quarters before any significant movement is seen. In regards to engineered materials and auto exposure, the company is happy as long as consumers are buying vehicles, but there may be some shifts in which products are being purchased. The company is working to touch on all three areas of the market (battery electric, hybrids, and ICE) as each market is developing differently.

The company has not seen a significant impact on their business due to changes in vehicle types and customer buying habits. Auto builds and volumes were up on a year-over-year basis. The China Acetyl capacity expansion is expected to increase demand for acetic acid, which is beneficial for the company. The impact of new capacity on margins will even out over time due to the company's global network and ability to flex their full value chain.

In the first quarter, the Acetyl chain business experienced a decline in pricing due to lower demand and the introduction of new capacity in China. However, this was expected and is a normal occurrence. Additionally, the company had a major turnaround in the first quarter which also impacted the business.

The speaker discusses the resilience of their business in China, which generated a 28% EBITDA margin despite market disruptions and higher costs. They also mention the drivers for their 2024 guidance, including M&M synergies and Clear Lake expansion, with offsets from outages and higher turnaround expenses. They anticipate a boost from lower debt services and lower inventory costs.

The speaker thanks everyone for participating in the call and mentions that they are available for any additional questions. They then hand the floor over to Bill Cunningham for closing remarks. The operator then closes the call.

This summary was generated with AI and may contain some inaccuracies.