US Celanese to Cut Rates if Demand Falters Further in Increasingly ‘Uncertain’ H2 – Execs
Celanese will aim to weather what is becoming an increasingly “uncertain” second half of 2025 by reducing inventories and keeping firm cost controls, but also by reducing operating rates if demand is not there, the CEO at the US-based acetyls and engineered materials producer said on Tuesday.
Scott Richardson added that key end markets for the company such as construction, automotive and consumer goods remain somehow in the doldrums, and occasional improvements in some subsegments during H1 may have just been an illusion of a strong recovery – before the storm.
The CEO and the CFO Chuck Kyrish acknowledged, however, there is a high degree of uncertainty about whether slight improvements in H1 in some segments represented genuine demand improvements or temporary supply chain restocking as some customers, them too, would be preparing for a potential turbulent H2.
“We are not assuming anything right now. We are continuing to be diligent on driving self-help actions, [and] we are focused on reducing inventory and are going to pull back on rates if we see any kind of reduction in demand,” said the CEO, speaking to reporters and chemical equity analysts.
The CEO said that the company has been somehow shielded from any direct tariff hit, as its operations in China are mostly focused on the domestic market, but nonetheless the current uncertainty and instability will be one of the factors to make the second half of 2025 an uncertain one. He repeated that claim on several occasions.
Celanese’s first-quarter sales fell, year on year, although it managed to narrow the net loss posted in the same quarter of 2024, the company said after the markets closed on Monday.
The producer also announced that as part of its efforts to deleverage it is to fully divest its electronic pastes and ceramic tapes producer Micromax, acquired in 2022 as part of the $11 billion acquisition of DuPont’s Mobility & Materials (M&M) business.
Despite the poor metrics for the first quarter, the financial results beat analysts’ consensus expectations which, together with the Micromax divestment and others which could be on the way, propped up Celanese stock by nearly 9% in Tuesday afternoon trading.
AMID THE CHALLENGES, SAVINGS
The CEO said Celanese projects generating between $700-800 million in free cash flow for 2025, driven by optimized working capital management, lower capital expenditure (capex), and comprehensive cost-cutting measures totaling approximately $60 million expected in the latter half of the year.
The chemical producer recorded stronger orders in March and April in its Engineered Materials sales volumes, but its Acetyl chain business delivered mixed results, with limited seasonal improvement in key segments including paints and coatings.
“In engineered materials, we saw a much stronger March than we saw in January and February. April orders were in line with that March pickup, and the order book for May looks very similar. We are seeing a volume pickup from Q1 into Q2 from engineered materials. June is too early to say [and] there’s some uncertainty around where June orders will go,” said Richardson.
“On the acetal side of things, we’re not seeing the normal seasonal pickup that we would typically see. Usually, Q2 is significantly better volumetrically in sectors like paints and coatings – we haven’t seen that. We’re seeing some of that, but not nearly at the level that we’ve seen historically in the past.”
The CEO added that within that division, however, the segment producing acetate tow has posted higher sales volumes on the back of some Q1 seasonality. The product is mostly used in cigarette filters as well as Heat Not Burn (HTB) products and demand has been on the rise in countries like Indonesia, Bangladesh and India.
Meanwhile, the producer’s beleaguered nylon business, which accounts for approximately 75% of the substantial $350 million profit deterioration in its Engineered Materials segment since 2021, has begun to stabilize following capacity reductions and operational adjustments.
However, executives acknowledged considerable work remains to restore this segment to acceptable profitability levels amid persistent industry overcapacity and challenging pricing dynamics.
“The industry has given up a lot of margins over the last several years, and it’s unsustainable. The actions that we started taking last year around capacity reductions, us flexing a different operating model here, hasn’t been enough yet. We are starting to see a stabilization here,” said the CEO.
“We’ve been very consistent that our focus is on cash generation, and we are looking at a myriad of options on the divestiture side. It’s not just Micromax: we’ve talked about having a portfolio of things we’re looking at.”
Capex has been reduced to maintenance levels, providing “significant” year-over-year improvement in free cash flow generation, according to Kyrish.