Epoxy
February 28, 2022
Urethane Highlights from BASF Investors Call
BASF SE’s (BASFY) CEO Martin Brudermüller on Q4 2021 Results – Earnings Call Transcript
Feb. 26, 2022 2:53 PM ETBASF SE (BASFY), BFFAF
BASF SE’s (OTCQX:BASFY) Q4 2021 Earnings Conference Call February 25, 2022 5:30 AM ET
Company Participants
Stefanie Wettberg – Investor Relations
Martin Brudermüller – Chairman of the Board of Executive Directors
Hans Engel – Chief Financial Officer
Martin Brudermüller
Good morning, ladies and gentlemen. It is hard to go back to business as usual the day after Russia attacked Ukraine. Yesterday marks the end of peace in Europe. It is a bitter day for all of us. A short time ago, no one would have thought it possible. We are dismayed by the attack and are very concerned about further developments. And we are all thinking at this moment of the people in Ukraine who have to fear for their lives and their future. Nevertheless, Hans Engel and I would like to welcome you to our Analyst Conference Call for the full year 2021.
2021 was a strong year for BASF. [Technical Difficulty] driven by the Chemicals and Materials segments. The Surface Technologies and Industrial Solutions segments also contributed considerably to the strong recovery. Looking at the underlying sales development, we increased sales prices by 25% and volumes by 11%. All segments achieved price and volume growth in 2021. Cash flows from operating activities improved by 34% and amounted to 7.2 billion Euros, as compared to 5.4 billion Euros in 2020. Free cash flow increased by 1.4 billion Euros to 3.7 billion Euros in 2021.
BASF’s automotive-related businesses continued to be negatively impacted by the semiconductor shortage. According to current data, global automotive production reached around 76 million units in 2021, and thus increased only slightly compared with the very low level of the previous year. For 2022, IHS Markit expects 84 million units. We assume that the semiconductor shortage will persist, at least in the first half of 2022. We therefore expect just 82 million units to be produced and are less optimistic than IHS for the full year. Throughout 2021, and particularly in the fourth quarter, higher raw materials prices and increased energy and logistics costs burdened the earnings development in all segments. Consequently, we will focus on further substantial price increases in the coming months to pass on the significantly higher costs and improve our margins in the downstream businesses. The established pricing procedures in these businesses lead to a delay in passing on costs.
Let’s now turn to the macroeconomic environment. According to the currently available data, global growth in the Chemical industry was 6.1% in 2021. The strongest growth in Chemical production was achieved in China, the world’s largest Chemical market, with a full-year expansion of 7.7%. Here, however, growth slowed at a high level during the course of the year. Electricity cuts had a negative effect on production, particularly in the third and fourth quarters. Growth in Asia excluding China reached 6.2% in 2021. Chemical production growth in the European Union was extraordinarily high at 6%. A contributing factor was the low basis in the previous year. In addition, the European Chemical industry benefited from the fact that availability of global production capacities for basic Chemicals was limited. In the United States, significant petrochemical capacities were temporarily unavailable. After the freeze in the first quarter, production on the US Gulf Coast was also negatively impacted in the summer by hurricanes Ida and Nicholas. In total, Chemical production in North America grew by only 1.7% in 2021.
On this slide you can see BASF’s volume growth by region compared with the prior year. With an increase in volumes of 10.6% in 2021, BASF Group’s growth was 4.5 percentage points above global Chemical production. Let’s now look at the volume development in the regions. With 14.4%, our volume growth was most pronounced in Asia excluding Greater China. In North America, sales volumes grew by 10.6% and in Europe by 10.1%. In Greater China, we increased volumes by 8.7% compared with an already very strong prior year. Volume development in the fourth quarter of 2021 was burdened in particular by lower demand for mobile emissions catalysts. This was a result of overall lower automotive production due to the semiconductor shortage. The electricity cuts for energy-intensive industries had only a minor impact on BASF’s operations in China.
We now look at our sales and earnings development by segment in 2021. Hans will comment later on the specific development in Q4. At BASF Group level, sales increased by 33% to 78.6 billion Euros due to considerably higher prices and volumes in all segments. Currency effects had a slightly negative effect and were mainly related to the US dollar. BASF Group’s EBIT before special items reached 7.8 billion Euros, an increase of 118% compared with 2020. All segments, with the exception of Nutrition & Care and Agricultural Solutions, increased EBIT before special items in 2021. The rise in earnings was driven in particular by the Chemicals and the Materials segments. For detailed explanations of the 2021 earnings development by segment, please refer to the BASF Report 2021 published this morning.
Let’s now look at our financial and non-financial targets. We achieved all our financial targets in 2021, and we have taken important steps to deliver on our mid-term CO2 emission target. As mentioned before, our sales volumes growth was well above global Chemical production. EBITDA before special items increased from 7.4 billion Euros to 11.3 billion Euros and thus by 53%. Our 2021 ROCE of 13.5% was considerably above the cost of capital rate of 9%.
For 2021, we will propose a dividend of 3.40 Euros per share to the Annual Shareholders’ Meeting, thus delivering on our progressive dividend policy. We want to reduce our absolute CO2 emissions by 25% by 2030 compared with the baseline 2018. In 2021, our CO2 emissions amounted to 20.2 million metric tons, a decrease from the 20.8 million metric tons emitted in 2020. This is remarkable given the strong growth in volumes. We also set a target of 22 billion Euros in sales with Accelerator products by 2025. These are products that make a substantial sustainability contribution in the value chain. In 2021, [Technical Difficulty] in 2020. We thus achieved our Accelerator sales target much earlier than planned. We will therefore adjust this portfolio steering target in the course of 2022.
Ladies and gentlemen, creating value for our shareholders is a top priority for us and this is why we aim to increase the dividend per share every year based on a strong free cash flow. At this year’s Annual Shareholders’ Meeting, the Board of Executive Directors and the Supervisory Board will propose to pay a dividend of 3.40 Euros per share, an increase of [Technical Difficulty]. In total, we would pay out 3.1 billion Euros based on the number of shares at the end of the year. This amount is more than covered by our free cash flow in 2021. With our dividend proposal, the BASF share offers an attractive dividend yield of 5.5% based on the share price at the end of 2021.
Since we have already received several inquiries, I would like to provide a short update about this year’s Annual Shareholders’ Meeting. The Board of Executive Directors and the Supervisory Board have decided to hold a virtual Annual Shareholders’ Meeting on April 29. The pandemic and the expected number of participants will not yet permit a physical meeting in 2022. The invitation with detailed information will be published in mid-March.
February 24, 2022
Westlake Investors Information
WESTLAKE CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)
Overview
We are a vertically integrated global manufacturer and marketer of performance
and essential materials and housing and infrastructure products. We have
historically operated in two principal operating segments, Vinyls and Olefins.
As a result of recent acquisitions, we reorganized our business into two
principal operating segments, Performance and Essentials Materials and Housing
and Infrastructure Products in the fourth quarter of 2021. Performance and
Essential Materials segment includes Westlake North American Vinyls, Westlake
North American Chlor-alkali & Derivatives, Westlake European & Asian
Chlorovinyls, Westlake Olefins and Westlake Polyethylene. Housing and
Infrastructure Products segment includes Westlake Royal Building Products,
Westlake Pipe & Fittings, Westlake Global Compounds and Westlake Dimex. The
change has been retrospectively reflected in the periods presented in this Form
10-K. We are highly integrated along our materials chain with significant
downstream integration from ethylene and chlor-alkali (chlorine and caustic
soda) into vinyls, polyethylene and styrene monomer. We also have substantial
downstream integration from PVC into our building products, PVC pipes and
fittings and PVC compounds in our Housing and Infrastructure Products segment.
Acquisitions
Hexion Global Epoxy Business
On November 24, 2021, Westlake, through one of its wholly-owned subsidiaries,
entered into a Stock Purchase Agreement (the "Hexion Purchase Agreement") by and
among Hexion Inc. ("Hexion"), an Ohio corporation, and, solely for the limited
purposes set forth therein, Westlake. Pursuant to the terms of the Hexion
Purchase Agreement, Westlake agreed to acquire Hexion's global epoxy business
for a purchase price of approximately $1,200 million in cash, subject to certain
closing date adjustments as set forth in the Hexion Purchase Agreement. On
February 1, 2022, we completed the acquisition of Hexion's global epoxy business
(the "Hexion Acquisition"). The assets acquired and liabilities assumed and the
results of operations of Hexion's epoxy business will be included in the
Performance and Essential Materials segment. This acquisition represents a
significant strategic expansion of Westlake's Performance and Essential
Materials businesses into additional high-growth, innovative and
sustainable-oriented applications - such as wind turbine blades and light-weight
automotive structural components. Because epoxies are produced from chlorine and
caustic soda, the transaction also provides vertical integration with our global
chlor-alkali businesses.
https://www.marketscreener.com/quote/stock/WESTLAKE-CORPORATION-14877/news/WESTLAKE-CORP-Management-s-Discussion-and-Analysis-of-Financial-Condition-and-Results-of-Operations-39558603/
February 24, 2022
Westlake Investors Information
WESTLAKE CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)
Overview
We are a vertically integrated global manufacturer and marketer of performance
and essential materials and housing and infrastructure products. We have
historically operated in two principal operating segments, Vinyls and Olefins.
As a result of recent acquisitions, we reorganized our business into two
principal operating segments, Performance and Essentials Materials and Housing
and Infrastructure Products in the fourth quarter of 2021. Performance and
Essential Materials segment includes Westlake North American Vinyls, Westlake
North American Chlor-alkali & Derivatives, Westlake European & Asian
Chlorovinyls, Westlake Olefins and Westlake Polyethylene. Housing and
Infrastructure Products segment includes Westlake Royal Building Products,
Westlake Pipe & Fittings, Westlake Global Compounds and Westlake Dimex. The
change has been retrospectively reflected in the periods presented in this Form
10-K. We are highly integrated along our materials chain with significant
downstream integration from ethylene and chlor-alkali (chlorine and caustic
soda) into vinyls, polyethylene and styrene monomer. We also have substantial
downstream integration from PVC into our building products, PVC pipes and
fittings and PVC compounds in our Housing and Infrastructure Products segment.
Acquisitions
Hexion Global Epoxy Business
On November 24, 2021, Westlake, through one of its wholly-owned subsidiaries,
entered into a Stock Purchase Agreement (the "Hexion Purchase Agreement") by and
among Hexion Inc. ("Hexion"), an Ohio corporation, and, solely for the limited
purposes set forth therein, Westlake. Pursuant to the terms of the Hexion
Purchase Agreement, Westlake agreed to acquire Hexion's global epoxy business
for a purchase price of approximately $1,200 million in cash, subject to certain
closing date adjustments as set forth in the Hexion Purchase Agreement. On
February 1, 2022, we completed the acquisition of Hexion's global epoxy business
(the "Hexion Acquisition"). The assets acquired and liabilities assumed and the
results of operations of Hexion's epoxy business will be included in the
Performance and Essential Materials segment. This acquisition represents a
significant strategic expansion of Westlake's Performance and Essential
Materials businesses into additional high-growth, innovative and
sustainable-oriented applications - such as wind turbine blades and light-weight
automotive structural components. Because epoxies are produced from chlorine and
caustic soda, the transaction also provides vertical integration with our global
chlor-alkali businesses.
https://www.marketscreener.com/quote/stock/WESTLAKE-CORPORATION-14877/news/WESTLAKE-CORP-Management-s-Discussion-and-Analysis-of-Financial-Condition-and-Results-of-Operations-39558603/
February 21, 2022
Celanese & DuPont
Celanese sees big opportunity in global autos, EVs with DuPont M&M deal
Joseph Chang
18-Feb-2022
NEW YORK (ICIS)–Celanese is making a bigger bet on automotive and electric vehicles (EVs) with its planned $11bn acquisition of most of DuPont’s Mobility & Materials (M&M) business, essentially doubling its Engineered Materials (EM) business.
- Celanese to acquire most of DuPont’s M&M business for $11bn.
- Celanese sees deal as way to further expand into autos and EVs.
- Acquisition doubles Celanese’s Engineered Materials segment.
More than half of the $3.8bn in estimated 2022 sales for the DuPont businesses being acquired go into automotive, and on a geographic basis, more than half of sales are in Asia, including almost a quarter in China.
Celanese’s new combined EM segment will have an estimated $7.4bn in sales and $1.8bn (around $900m from DuPont M&M) in earnings before interest, tax, depreciation and amortisation (EBITDA).
“It is a continuation of [Celanese’s] strategy to bolster its EM business while making the more commodity Acetyls business a smaller amount of the total pie,” said Fermium Research analyst Frank Mitsch in a research note.
The deal “establishes Celanese as offering the broadest and most differentiated EM portfolio globally” and also enhances the segment’s geographic footprint, especially in Asia which had been diminished by the $1.6bn divestiture of its 45% interest in the PolyPlastics joint venture to Japan’s Daicel in October 2020, he noted.
“Within autos, this acquisition will increase Celanese’s exposure to EVs, and auto will remain the largest EM end market,” said Michael Sison, analyst at Wells Fargo, in a research note.
“The shift towards EVs is expected to drive annual growth of 4% for the acquired polymer families (or 450,000 tonnes/year of incremental global demand for these polymers from 2022 to 2027), though this could be as much as 6% if Celanese is able to increase penetration in line with its project pipeline model,” he added.
The deal brings complementary chemistries to Celanese’s Engineered Materials segment as well with DuPont M&M’s expertise in nylon, specialty nylons, polyesters and elastomers. Celanese is big in polyacetal (POM), elastomers from the Santoprene acquisition from ExxonMobil, and ultra-high molecular weight polyethylene (UHMW-PE), along with nylon and polyesters.
Celanese estimates EVs use about the same amount of DuPont M&M’s polymers per vehicle – 26kg – as traditional internal combustion engines (ICEs), while hybrid EVs use about 28kg per vehicle.
As the number of global EV sales are expected to grow by a compounded annual rate of 32% from 2022 to 2027 and hybrid EVs by 17%, more than making up for the estimated 3%/year decline in ICE vehicle sales (leading to overall auto unit sales growth of 4%/year), the acquired business should benefit from the EV transition.
“A portion of DuPont’s portfolio is in more traditional under-the-hood applications [but] we feel really confident that with our commercial model and our reach into the OEMs and the tiers, we’ll make that transition very successfully,” said Tom Kelly, senior vice president, Engineered Materials at Celanese, on the deal conference call.
The acquired DuPont M&M assets also brings Celanese much greater exposure to Asia.
“The Asia presence of this business is really strong. As we overlay our base business, we think that’s a real opportunity to further optimise in that region of the world,” said Celanese CFO Richardson.
“This acquisition really accelerates our presence into Asia. The M&M business has really great customer relationships we think we can leverage,” he added.
Wells Fargo’s Sison notes the acquired business’ strong relationships in Japan and South Korea, which is positive, especially for automotive.
BRAND EQUITY VALUE
Much like ExxonMobil’s highly recognisable brand name Santoprene elastomers franchise acquired by Celanese for $1.15bn in December 2021 brought benefits, DuPont brands such as Zytel (nylons), Crastin (polybutylene terephthalate), Rynite (polyethylene terephthalate) and Hytrel (elastomers) should also raise the profile of its offerings.
“Customers ask for the brand. They don’t ask for the chemical name – they ask for the DuPont brand,” said Scott Richardson, chief financial officer of Celanese.
“When you take that brand equity and put that onto the way that we drive projects and the deep customer relationships that we have, we think bringing that together with the legacy Celanese polymers and Santoprene brand we acquired really gives us good revenue synergy optimisation opportunities,” he added.
Along with projected cost synergies of $275m-350m by year three from manufacturing utilisation and scale and back integration into polymerisation among others, Celanese also projects revenue synergies of $125m-150m by year four of the completed deal – much of it from leveraging Celanese’s project pipeline model where it works to improve win rates with customers.
The $11bn purchase price for most of DuPont’s M&M business represents a multiple of around 14x 2021 EBITDA of about $800m, and 12x estimated 2022 EBITDA of about $900m.
Celanese sees 2022 EBITDA growth in the assets being acquired from a recovery in auto builds as well as easing of raw material and logistics constraints over the course of the year.
With the DuPont M&M deal, Celanese’s EM segment’s share of entire company EBITDA in 2022 would rise from 35%, to 56% if the $450m in synergies were included. Celanese’s other segments are Acetyl Chain and Acetate Tow.
Insight article by Joseph Chang
February 21, 2022
Celanese & DuPont
Celanese sees big opportunity in global autos, EVs with DuPont M&M deal
Joseph Chang
18-Feb-2022
NEW YORK (ICIS)–Celanese is making a bigger bet on automotive and electric vehicles (EVs) with its planned $11bn acquisition of most of DuPont’s Mobility & Materials (M&M) business, essentially doubling its Engineered Materials (EM) business.
- Celanese to acquire most of DuPont’s M&M business for $11bn.
- Celanese sees deal as way to further expand into autos and EVs.
- Acquisition doubles Celanese’s Engineered Materials segment.
More than half of the $3.8bn in estimated 2022 sales for the DuPont businesses being acquired go into automotive, and on a geographic basis, more than half of sales are in Asia, including almost a quarter in China.
Celanese’s new combined EM segment will have an estimated $7.4bn in sales and $1.8bn (around $900m from DuPont M&M) in earnings before interest, tax, depreciation and amortisation (EBITDA).
“It is a continuation of [Celanese’s] strategy to bolster its EM business while making the more commodity Acetyls business a smaller amount of the total pie,” said Fermium Research analyst Frank Mitsch in a research note.
The deal “establishes Celanese as offering the broadest and most differentiated EM portfolio globally” and also enhances the segment’s geographic footprint, especially in Asia which had been diminished by the $1.6bn divestiture of its 45% interest in the PolyPlastics joint venture to Japan’s Daicel in October 2020, he noted.
“Within autos, this acquisition will increase Celanese’s exposure to EVs, and auto will remain the largest EM end market,” said Michael Sison, analyst at Wells Fargo, in a research note.
“The shift towards EVs is expected to drive annual growth of 4% for the acquired polymer families (or 450,000 tonnes/year of incremental global demand for these polymers from 2022 to 2027), though this could be as much as 6% if Celanese is able to increase penetration in line with its project pipeline model,” he added.
The deal brings complementary chemistries to Celanese’s Engineered Materials segment as well with DuPont M&M’s expertise in nylon, specialty nylons, polyesters and elastomers. Celanese is big in polyacetal (POM), elastomers from the Santoprene acquisition from ExxonMobil, and ultra-high molecular weight polyethylene (UHMW-PE), along with nylon and polyesters.
Celanese estimates EVs use about the same amount of DuPont M&M’s polymers per vehicle – 26kg – as traditional internal combustion engines (ICEs), while hybrid EVs use about 28kg per vehicle.
As the number of global EV sales are expected to grow by a compounded annual rate of 32% from 2022 to 2027 and hybrid EVs by 17%, more than making up for the estimated 3%/year decline in ICE vehicle sales (leading to overall auto unit sales growth of 4%/year), the acquired business should benefit from the EV transition.
“A portion of DuPont’s portfolio is in more traditional under-the-hood applications [but] we feel really confident that with our commercial model and our reach into the OEMs and the tiers, we’ll make that transition very successfully,” said Tom Kelly, senior vice president, Engineered Materials at Celanese, on the deal conference call.
The acquired DuPont M&M assets also brings Celanese much greater exposure to Asia.
“The Asia presence of this business is really strong. As we overlay our base business, we think that’s a real opportunity to further optimise in that region of the world,” said Celanese CFO Richardson.
“This acquisition really accelerates our presence into Asia. The M&M business has really great customer relationships we think we can leverage,” he added.
Wells Fargo’s Sison notes the acquired business’ strong relationships in Japan and South Korea, which is positive, especially for automotive.
BRAND EQUITY VALUE
Much like ExxonMobil’s highly recognisable brand name Santoprene elastomers franchise acquired by Celanese for $1.15bn in December 2021 brought benefits, DuPont brands such as Zytel (nylons), Crastin (polybutylene terephthalate), Rynite (polyethylene terephthalate) and Hytrel (elastomers) should also raise the profile of its offerings.
“Customers ask for the brand. They don’t ask for the chemical name – they ask for the DuPont brand,” said Scott Richardson, chief financial officer of Celanese.
“When you take that brand equity and put that onto the way that we drive projects and the deep customer relationships that we have, we think bringing that together with the legacy Celanese polymers and Santoprene brand we acquired really gives us good revenue synergy optimisation opportunities,” he added.
Along with projected cost synergies of $275m-350m by year three from manufacturing utilisation and scale and back integration into polymerisation among others, Celanese also projects revenue synergies of $125m-150m by year four of the completed deal – much of it from leveraging Celanese’s project pipeline model where it works to improve win rates with customers.
The $11bn purchase price for most of DuPont’s M&M business represents a multiple of around 14x 2021 EBITDA of about $800m, and 12x estimated 2022 EBITDA of about $900m.
Celanese sees 2022 EBITDA growth in the assets being acquired from a recovery in auto builds as well as easing of raw material and logistics constraints over the course of the year.
With the DuPont M&M deal, Celanese’s EM segment’s share of entire company EBITDA in 2022 would rise from 35%, to 56% if the $450m in synergies were included. Celanese’s other segments are Acetyl Chain and Acetate Tow.
Insight article by Joseph Chang
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