塞拉尼斯 (CE) 2007 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2007 Celanese Corporation Evans conference call. My name is Dan and I will be your operator for today. At this time all participants are in listen-only mode. (OPERATOR INSTRUCTIONS). As a remind this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Mark Oberle, Vice President of Investor Relations and Public Affairs. Please proceed, sir.

Thank you. And welcome to the Celanese Corporation second quarter 2007 financial results conference call. My name is Mark Oberle, Vice President of Investor Relations and Public Affairs. With me are Dave Weidman, Chief Executive Officer, and John Gallagher, Executive Vice President and President. And the Celanese Corporation press release was distributed via Business Wire yesterday and is posted on our website: celanese.com. During this call, management may make forward-looking statements concerning, for example, Celanese Corporation's future objectives and results which will be made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations, and are subject to uncertainty and changes in circumstances.

Actual results may differ materially from these expectations due to changes in economics, business, competitive markets, political, and regulatory factors. More detailed information about these factors is contained in the earnings release and in the Celanese Corporation's filings with the Securities and Exchange Commission. Celanese Corporation undertakes no obligation to update publicly or revise any forward-looking statements. Celanese Corporation's second quarter 2007 earnings release references the performance measures net debt, adjusted earnings per share, operating EBITDA and affiliated EBITDA as non-U.S. GAAP measures. For not most directly comparable financial measures presented in accordance with U.S. GAAP and our financial statements and for our reconciliation of our non-U.S. GAAP measures to U.S. GAAP figures please see the accompanying schedules to our earnings release which will also be posted on celanese .com.

This morning Dave Weidman will review the performance of the company and John Gallagher will provide an overview of the business results for each segment and the financials. Now I would like to turn the call over to Dave Weidman. Dave?

Thanks, Mark and welcome everyone to today's call. We are delighted to have this opportunity to discuss the quarter's results and answer your questions. First, let me update everyone on the status of our outage of our Clear Lake acetic acid facility. The official outage occurred by acid leaks occurred in May and repairs were made at that time. However, as we attempted to bring the unit up to full production rates, it became apparent that more extensive repairs would be necessary. The operational difficulties with the unit were determined to be caused by a chemical or metallurgical issue related to the materials that line the rag-- reactor interior. At that point, we announced that we believe we could make the necessary repairs and have the unit back up by mid-July. But during the mid-July restart, unfortunately, we discovered another smaller leak. Earlier this week, we were able to re-enter the reactor and more fully assess the current situation. Today, repairs are progressing and based on the latest estimates, we believe that this outage will not require us to replace the reactor, and that we should be in a position to restart the reactor within weeks, not months, or quarters. We understand that this has been a difficult situation for our customers. We're actively working to minimize the impact this has had on their businesses and will continue to do so until this issue has been fully resolved. While this situation is regrettable, I do want to stress that it is temporary.

The financial impact of the Clear Lake outage in the second quarter was mitigated by an earlier-than-expected startup of our Nanjing acetic acid facility, higher pricing, especially in Asia, and some successful efforts to reduce production costs. Overall, however, we estimate that the Clear Lake outage pressured earnings by $0.05 to $0.10 per share in the quarter. Now, the company carries normal and customary insurance coverage for both property damage and business interruption. And we have already notified our insurers of the event. This is subject to a self retention of approximately $50 million, but the timing of recoveries may lag the expense associated with the repairs, and lost income by six to eight quarters. Before turning the call over to John, I'd like to highlight our second quarter operating results, and also the substantial progress we've made in executing our long-term growth strategy.

Considering the difficult situation we faced during the second quarter, results were outstanding and reflect the strength of our global franchises and the dedication and commitment of our employees around the world. Revenues were $1.6 billion, up 7%, from $1.5 billion a year ago. Adjusted earnings per share were $0.84, compared to $0.71 last year, operating EBITDA was $326 million, compared to $310 million last year. It's also worthy to note that record earnings were achieved in both Ticona and Acetate products. We continue to make tremendous progress on our growth strategy to deliver between $300 and $350 million in improved earnings power to the portfolio by 2010. Let me highlight four items of accomplishment here in the second quarter.

First, Asia. As mentioned earlier, our integrated Nanjing chemical complex completed a successful startup of acetic acid last month, which ramped up to full production volumes ahead of what we had previously anticipated. In this achievement, we were very pleased with the strong performance of our suppliers. Particularly the supplier of carbon monoxide who uses coal gasification technology. Construction of the other five units of the Nanjing complex is progressing with startups of these units expected at various times over the next two to three years. These units include emulsions, vinyl acetate, acetic anhydride and two advanced engineered materials units.

Second, we announced and began executing an important revitalization plan for our industrial specialties, Emulsions, and Polyvinyl Alcohol businesses. Over the next 12 to 18 months, we will consolidate our global manufacturing proof-- footprint and energize our customer application development process to not only capture significant cost savings, but drive growth through innovation. The revitalization of these businesses is a key component for capturing a significant part of the $100 million in earnings growth in consumer and industrial specialties group. Another component of this earnings growth is our acetate business. And as projected, we received $34 million in dividends from our China ventures this quarter, as our expansions in these assets are now complete. And we announced plans to capture synergies associated with the acquisition of Acetate Products, Limited., which appeared very confidently to be on track to achieve projected benefits.

Third, we drove increased value by utilizing our strong cash flow, as we closed on the debt refinancing transaction. This action lowers our overall costs of borrowing and provides greater financial and operational flexibility. Additionally, we returned $400 million in cash to our shareholders through our share repurchase program, which was completed just a few days ago.

Fourth, we have completed our transformation to an independent company, with the exit of Blackstone in May. Farah Walters joins our board and we are delighted to have a strong team of experienced board members for our company. The underlying fundamentals of our business has remained strong. Europe continues to deliver sustained economic growth, and demand remains strong, while China remains very robust. North American housing and auto continues to be sluggish, but our global balance, and end market diversification helped to provide sustained earnings growth for the company. With that, I would like to turn the call over now to John Gallagher, and as we announced last week, and all of you know, John will now take on the new exciting challenge as he leads the Acetyl Intermediates Group and has overall accountability for Asia. We thank John for his significant and long lasting contributions as CFO, and look forward to his positive impact on Asia and the Acetyls business. John?

Thanks, Dave. I appreciate the confidence that you and the board have put in me to lead this important business, as well as the Asia region, which is so critical to the success of our strategy. I also welcome Steven Sterin as the new CFO. Steven has worked directly under me for the last two years and is well prepared to take on this new responsibility. Now, let's start by turning to page 7 in the Power Point presentation that is posted on our website. Net sales from continuing operations for the quarter rose 7% to approximately $1.6 billion, from over $1.5 billion last year. Operating profit decreased to $71 million, from $152 million last year. Net earnings were a loss of $117 million.

Our second quarter results, included unusual items related to the execution of our earnings growth strategy. These unusual items included pre-tax expenses of approximately $75 million, related to a long-term management compensation program that is associated with the performance achieved in 2004 through 2006. This payment was triggered by the Blackstone exit. $32 million of unusual items included expense-- expenses associated with our revitalization plans of our Emulsions and Polyvinyl Alcohol business. And $265 million related to the debt refinancing transaction that closed in the quarter. As Dave mentioned, these actions are consistent with our growth strategy to deliver between $300 and $350 million of increased earnings power in our portfolio by 2010.

Our adjusted earnings per share were $0.84, based on a 28% tax rate. Our EBITDA was $326 million in the quarter, a 5% increase from last year. Our U.S. GAAP results excludes a discontinued operations of our methanol production, and the results of our Oxoalcohol business that- tha--that were divested during the first quarter of this year. Our adjusted earnings per share and our operating EBITDA continue to reflect the earnings of the Edmonton methanol production, even though they are discontinued for GAAP, we wanted to remain consistent with the guidance that we provided at the beginning of the year.

Now, let's look at each of the businesses starting with Chemical Products on page 8. Net sales increased 3% to just over $1 billion, driven by higher pricing on continued strong demand, and favorable currency effects. With the successful start-up of our Acetic Acid unit in Nanjing, we were able to offset some of the volume loss from the unplanned outage of our Acetic Acid unit at Clear Lake. Operating EBITDA decreased 15% to $176 million, as higher pricing could not offset the lower volumes in the quarter. The absence-- the absence of methanol production, which contributed $12 million last year, and increased raw material costs in the quarter.

Turning to page nine, Ticona net sales were up 12% at $257 million on strong volume growth of 8% and currency effects of 4%. We continue to see strong demand for all of our products as reflected in the increased volumes, particularly in Europe and Asia. Operating EBITDA increased $70 million, from $66 million, as the higher volumes more than offset higher energy costs in Europe, and [the] timing of production and inventory spending. We saw continued successful penetration in the North American automotive market, so while auto builds have been flat to slightly down, versus prior year, our growth is coming through increased pounds per auto. Acetate Products continues to deliver outstanding results as shown on page 10. Net sales were up 34%, to $235 million, and sales resulting from the acquisition of the APL business were recorded in the quarter. Operating EBITDA was $80 million, a 45% increase over prior year. We received higher dividends this year from our Acetate China ventures, which totaled $34 million this quarter, versus $21 million in the second quarter of last year. Benefit from the Acetate Group's revitalization efforts drove the remainder of the increase.

Performance Products net sales were $47 million, down slightly from last year's results. Lower volumes were primarily related to our exit of our non-core low margin trade business. Volumes for the core Sunett sweetener business, however, increased as global demand for low calorie beverage and confectionery goods continued to grow. Operating EBITDA was flat year-over-year, at $21 million, as volume increases in Sunett offset lower overall pricing, as expected. Our equity and cost investments continue to deliver strong performance as shown on slide 11. As shown on the graph on the left, the income statement impact increased to $72 million, compared to $57 million last year, on higher dividends, from our Acetate China ventures. Cash flow is shown on the right, was $59 million, versus last year's $58 million, as higher dividends from China offset the lower dividends related to the timing of payments from our equity affiliates. Page 12 highlights a new -- new disclosure that we introduced last quarter to give more transparency to our strategic equity affiliates. On the left, the quarterly results are broken out by the affiliates that are part of Ticona and those associated with our [Infra Serve] businesses. On the right, you see the proportional results based on Celanese ownership of these affiliates.

In that chart, you will see the affiliate EBITDA in excess of the equity net earnings of the affiliate that is not reflected in our current operating EBITDA results. For those of you who model Celanese on an [EBITD, EBITDA] basis we have also included the net debt figures. As you can see on the right, these strategic affiliates have delivered an additional $43 million of proportional EBITDA above and beyond the $41 million we have reported in our operating EBITDA. On page 13, we summarize changes in our cash flow, specifically as it relates to operating and financing activities. Cash flow from operations in the first half of 2007 decreased $88 million, from the same time last year. If you exclude discontinued operations, and the long-term management compensation, which were primarily one time in nature, cash flow from continuing operations would have been $58 million higher versus the prior year, driven by higher operating EBITDA and lower working capital. Additionally, it should be noted cash taxes paid during the first half of 2007 were approximately $109 million higher than the first half of 2006. During the second quarter, we used approximately $706 million of cash, primarily associated with our comprehensive recapitalization plan. We made debt repayments totaling $211 million. We paid refinancing costs of $240 million. And repurchased shares for $258 million.

The execution of this recapitalization plan representing a major milestone in the company's growth strategy. In to-- in hindsight, the timing of this refinancing transaction could not have been better. We successfully improved our balance sheet. We pr-- improved our financial flexibility. And lowered our overall borrowing cost. Our updated business outlook is found on page 14. Chemical Product volumes are expected to continue to be impacted by the Clear Lake outage into the third quarter. Pricing should remain high on continued strong demand. Our Nanjing Acetic Acid unit is expected to continue to run at full rate to help offset the lost volume from Clear Lake. In Ticona, we expect to continue growth of approximately two times GDP in both transportation and nontransportation applications. Most raw materials are expected to remain high during the balance of the year but we should start to see some easing of methanol, which as-- which as you know is a key raw material for Ticona. Acetate Products is expected to see continued improved results as it benefits from its revitalization activities. Synergies from the APL acquisition should be realized over the next four to six quarters, as the business continues on track to deliver between $220 and $230 million in operating EBITDA by 2008 as we highlighted last December. In Performance Products, we expect volume increases to offset decreased pricing, resulting in sustained earnings for this business.

Beginning in the third quarter, we will start reporting our operating segments differently. We'll split out our Emulsions and PVOH results from chemical products, and the [AT] plastic results from other activities business segments to provide additional transparency into the performance of these businesses. These business-- businesses will make up our Industrial Specialty segment. All of these businesses use products from our Acetyls Intermediate Group as key raw materials. We will also group Acetate Products and Performance Products in a segment called Consumer Specialties. You can think of this segment as being more stable with low volatility of earnings and relatively high operating margins. These businesses are also more resistant to economic downturns, and have very strong cash generation. Before we report our third quarter results, we will provide you with quarterly historical view of these new segments to help you with your earnings comparisons. As Dave said, we will not be providing short-term financial guidance at this time.

But I do want to highlight a couple of key items to consider, relating to our portfolio changes and improved capital structure from last year. On page 15, you can see our adjusted EPS, as reported for both third and fourth quarters of 2006. We've also highlighted the contribution of two businesses, our Oxoalcohol business that we sold in the first quarter of 2007, and the meneth-- and the Methanol Production which was shut down at the end of the first quarter of 2007. You can see that these businesses contributed to total of $0.32 per share, in the second half of last year, that won't be reflected in this year res-- this year's results. With our recent refinancing, our interest expense is expected to be 10 to $15 million lower per quarter this year than last year. We recently announced the successful completion of our stock repurchase program that we executed over the quarter. In total, we purchased approximately 11 million shares for a total of $400 million, and reduced our common shares outstanding by approximately 6%. You won't see the full impact of this reflected in our EPS calculation for awhile as diluted EPS uses the weighted average shares outstanding for the year. By the end of the year, our weighted average common shares outstanding should be 5 to $6 million lower than at the end of the second quarter, excluding any potential option dilution. With that, I would like to turn it back over to Mark and then open it up for Q-And-A.

Great, with that we would like to open it up for Q-And-A?

(OPERATOR INSTRUCTIONS). Your first question comes from the line of [Evelyn] Rodriguez. Please proceed.

Good morning, guys.

Good morning, Evelyn.

David, question for you on Clear Lake. From a technical standpoint, I mean with the plant being down for a few months, one should be started in a few week, as you said, how long should it take -- how long should we prepare -- low long will it take to restart it and realign everything again?

Evelyn, we -- you know, we discussed on the prepared remarks, we view the issue being an issue that can be repaired, and with that, the unit, in our view, is going to be out for weeks, and not months or quarters. Than is and that is including what we need to repair, the restart associated with. It obviously, there will be some impact as we go throughout the year, we need to balance back the supply chain you through the system, and make sure that our customers needs are satisfied. There will be financial impacts short-term, and as we get the unit back up and running, as we look at the supply chain and start getting the balance back in the system, we will have more transparency to the performance in the second half of the year. And give you some short-term more precise guidance when that occurs.

Okay. A question on the affiliate. I mean they have been performing extremely well. Is there anything that can be done in terms of consolidate, especially like with Chinese acetate, JVs, do you own more than 60% of them or slightly less and la can you do with that.

Evelyn, these are great joint ventures and we believe that they are underappreciated jewels within our portfolio and offer value beyond what is being recognized today. We have done everything that we can think about doing to get consolidation in place with the current accounting rules, the current GAAP rules. We continue to work with our partners, and have said repeatedly that if we had the opportunity to buy the ventures and move to either a full ownership, or a larger position, we would be eager to do that, and believe that it is a good use of the shareholders' cash. We need two parties interested in that transaction. We don't have that now. What we have done is provided more transparens to the numbers and are now reporting proportional EBITDA, more income statement information, as well as some balance sheet information for our affiliates, so that the investors have better transparency and can judge the value.

Okay. Thank you.

The next question comes from the line of Kevin McCarthy. Please proceed.

Good morning.

Hi, Kevin.

Dave. What is the cost, capital cost of the reactor that you have coming in the spring, and assuming you can repair clear lake, what will you do with that reactor when it arrives? And do you have alternative uses for it, perhaps in Nanjing or elsewhere?

Yes, Kevin, I'm sure you can appreciate we are in a position to not -- we're not in a position to talk specifically about the capital associated with the reactor. But the capital costs for these reactors are well within what we would normally think capital spending would be. I think about depreciation, plus or minus for total capital spend. For the company, depreciation and amortization, somewhere in that range. The use of the reactor in the sparing strategy is, you know, something that we are developing, and looking at and it is a reactor that has capability of being spared for not only clear lake, but also our other facilities within the system. At least four or five of the manufacturing facilities that we have. And we would anticipate that the sparing strategy, utilizing extra reactors would be part of our program going forward.

Okay. And then shifting gears to acetate products, you reiterated your goal of 220 to 230 million of EBITDA for that business. If I take your very good second quarter results, and annualize them, I'm coming up with 184, and I know that you have additional synergies flowing through, but can you walk us through or bridge the gap of how you get from today to your goal and what things can get you there?

Sure. I think you hit the key things. You know, the base business outside of the joint ventures probably has a modest uptick as we only this year shut down the final unit in North America that we anticipate shutting down. And that was in Edmonton Canada unit that went down in the first quarter. So there will be some upside associated with that. The joint ventures in China are performing at expected levels with the dividend coming out this quarter. And I remind you and caution that you it is a once a year dividend. It is not a dividend that comes out in even spaces. It is just a one a year dividend. And then the acquisition is a fantastic acquisition.

We believe we bought a very attractive economic, but frankly, we've been incredibly impressed with the synergy opportunities, and the team over there is moving aggressively to capture those synergies, and we've rationalized some production, and we've moved forward on some supply chain opportunities, significant supply chain opportunity, and SG&A costs were moving forward on those, and so you would see more upside in the future years, associated with some of our base business restructuring that would be completed and then some upside in the acquisition that is synergies in the acquisition that you probably didn't see an awful lot of in the second quarter.

And then finally for modeling purposes, if I consider the Edmonton shutdown as well as the methanol agreement that you had with meth NX, how much did methanol contribute to the third quarter of '06, fourth quarter, and first quarter of this year? How should we think about that?

I can give you that, Kevin. The methanol, and these are operating profit numbers, and I think the depreciation frankly is not that big, so it is around 10 million in the third quarter of '06, around 17 million in the fourth quarter, and these are the operating profit numbers. The EPS is reflected in page 15, on the power point that is on the Web site, to it is roughly 10 million, 17 million, fourth quarter of '06, and then we earned 33 million in the first quarter of 2007.

Okay. Thank you, guys.

Your next question comes from the line of David Begleiter. Please proceed, sir.

Thank you. Good morning.

Hi, Dave.

David, on clear lake, just to be clear, do you expect the plant to be fully up and running by the start of Q4?

You know, Dave we do expect the plant to be up and operating in a matter of weeks, not months or quarters. Beyond that, you know, we're reluctant to say much more at this point in time. We are in the repair process, and restart process, and as we move through it, you know, as quickly as possible, we will get more information out. And Dave, as you know, obviously, we, for our customers and for our investors, this is a regrettable situation, and not one that we're proud of at all. But our organization is committed to driving the long-term program of the company, and as we've looked at the Nanjing startup, under the cloud of clear lake is a bright silver lining of Nanjing with a better running of the facility and a better supply of CO than even the optimists in our company had projected. And we continue to focus on executing for the long term and the short term, both.

Fair enough. And has the outage changed your thinking on Tampa, the long-term thoughts on Tampa being shut down or not shut down?

You know, Dave, we condition to look at Tampa and evaluate it in the long term. We view the clear lake situation as being short term and temporary. Tampa shutdown obviously would be long term and strategic. So I would say no, there has not been a material change in our thinking on Tampa, timing, or the option nality there. We still are considering options. We still have not been as you know public on the timing of it, but continue to look at that, as a long-term strategic move.

And what is your current thinking on both BP and Nanjing and sub chem in terms of their order?

Good question. I think there is some public information that says BP has delayed Nanjing further. I think they're out into 2010. We continue to look at sip ch em and hear rumors about plays in sip chem. In December, during our investor meeting, we will update the next year in our three-year outlook, and we certainly -- our experience is, you have to be cautious, adding volumes up that are announced, and really look at what is on the ground and what is being started. About three years is the furthest time horizon that we think has any type of validity. And that will be updated during our investor conference in deser. And lastly with Nanjing up and running, thoughts on perhaps doubling that size or your next major world scale addition going forward?

We continue to evaluate options, and obviously with the footprint that we have globally and with the importance of sell the Celanese position in the global world, we will balance it. It will be a balance of growth, manufacturing, economic, logistics, and capital economics. Certainly, a big facility like clear lake at 1.2 million tons, it would be nice to be able to replicate that in Asia or whether it be Singapore or Nanjing, and that is not the only option on the table we're considering. We look at a number of options.

Thank you very much.

Thanks, Dave.

Your next question comes from the line of Sergey Vasnetsov. Please proceed.

Good morning. I realize that the insurance company is 1 aggressive from collecting premium and conservative in payout but six quarters delay seems like a very long time and I just want your comments on the reasons for such a delay, and also on the constant treem, the impact on the PS and cash flow, and in other words would you be able to accrue some of the EPS in fact on the positive side from conversation, sooner than you get actual cash a few quarters later?

Well, maybe I can take that one for Dave. It is very -- the claims in these types of business interruption incidents, and Celanese has had experience in the past with this, and filing these claims, they are very, very complicated, because they try and factor in the exact cost of the incident and try to take out changes in market dynamics which makes it a difficult claim process. So unfortunately, as much as we wouldn't like it as well, it is a six to eight quarter process. Typically, I think the way the accounting works on this is we would incur all of the expenses. We might be able to book a receivable once we have some type of agreement or confirmation on a range of the claim from the insurance carrier. And then typically the cash would come in, you know, shortly after that. So that is how I would envision this process unfolding over the next 12 to 24 months.

Okay. Thank you.

Your next question comes from the line of [BJ Jubcar]. Please proceed.

Yes, hi, good morning. So the $74 million of compensation charge that you're taking as one time, can you just talk about that, and why is it one time?

Yes. There was a performance-based long-term compensation program established as part of the black stone private equity structure. It was structured in a way that the amount was based on performance, the payout was based on completing the transition of black stone out of the company, and restoring the company to being a fully independent company. The fundamental drivers in the performance had to do with EBITDA growth, cash growth, some of the fundamental things that we've been focused on.

For years 2004 to 2006.

And it was 2004 to 2005 and 2006. And so that, you know, that was what went into it. That was the amount. And as you know, and the payout was triggered again by the black stone exit.

But there is nothing more ongoing than management compensation so I'm just --

No, no, I think from an investor standpoint, it is important to recognize that we've put in place long-term compensation programs for executives, for retention and alignment with shareholder value creation and we announced that in the first quarter, and highlighted some of the costs associated with that going forward.

But management is aligned -- this is a broad program, went deep into the company with about 100 to 120 people participating in it, and it focused on total shareholder return, and that ultimately is the key driver in the compensation. Very performance-based. And intended to keep management aligned and retained. So BJ, those compensation figures are in our 2007 results. So this is -- we said one time because it relates to the prior periods of 2004 to 2006, and we couldn't record it because it was -- of the way the accounting rules were because of the double trigger with the black stone exit.

And the second charge of $32 million that you're talking about, there is some restructuring, some business optimization, can you just go into that? I mean why is business optimization a one-time charge?

Well, you know, there is a number of restructurings. We've said all along here, this is pretty much what we -- most of this business optimization is around the PBOH and emugses, so as we indicated even in our investor day, that you know, there needed to be some revitalization action taken around those businesses to improve and I think we even said we're targeting 50 million operating EBITDA improvement, so again, consistent with -- you can make your own judgment, whether you want to include a one-time or not one time, and we wanted to break out to kind of get an idea of the underlying earnings power, that these are severance costs, significant severance costs for people that were asset impairments, related to these restructuring programs, to improve the business. Some more sort of clarity would be good, because if it is a service charge and that may be okay you but if you're just optimizing businesses, company does that all the time.

No, I understand that.

We try, we have table seven and I don't know if you had a chance to review, and attached to the press release, that tries to give as much detail so it actually adds 25 million in employee termination benefits and asset impairments are broken out and we continue to try to do that so you can assess your judgment.

And one quick question on the supply demand, or facets, I know you will talk about that at the end of the year but ask you just talk about what you're seeing right now, excluding this clear rate, what are the operating rate in acetics for global?

TJ, they're very strong and capacity utilization we would judge without the clear lake in the mid 90 range and we judged that situation as we highlighted before through 2007, 2008, and 2009, so you know, as projected, it continues to be a very good forward view of capacity utilization. Global economy, by the way, just to remind you, the global economy is really what drives the performance of Celanese. We have a very well-balanced footprint geographically, and as we look at the global economy, it continues to be very strong, and aseatic acid as a product continues to grow at global GDP plus we say 150 basis points and it is somewhere in that range, and maybe a little bit higher. Pricing is strong in different regions 6 of the world. We judge it would be strong independent of the clear lake. And very healthy environment for selling these businesses.

And one last question. You had commented that you expected it to do better than -- acetates to do better than acrylics because of raw materials and all of that. Do you still feel the same? What sur outlook?

We do. We continue to be very pleased with the progress that is occurring in some of the penetration in new uses and new applications, and BAE, vinyl acetate ethylene products in particular offer advantages in economics and also advantages in environmental concerns, and no BOC type products, and very easy to formulate into growing regions of the world like China, tend to prefer these type of products, and they formulate new applications into those products, so we're pleased with the underlying fundamentals of vinyl-based systems.

Your next question comes from the line of [Ben Reitzes]. Please proceedly.

Was going to ask the same question that PJ asked regarding the $74 million charge. I guess the only thing I would ask just as a follow-up, how many people will be involved in that, in other words can benefit from that in terms of management, how many people are we talking about?

I think as announced or highlighted in some of the documents, the proxy documents, as well as the IPO documents, I think the original group was somewhere in the 30 range, and then as the executives were added to the company, it grew from there. I think the total pool eventually was somewhere 35 to 40, but it has expanded as we go forward. There was a -- if you look back in the fourth quarter filings, there was a deeper program that was largely cash-based. Based on same performance criteria that went deep near the company, and paid out last year, and then going forward, we got a program that is deep, and total shareholder return is the performance criteria.

So something like 50 people at least? Is that kind of what I'm hearing? Is that just round number?

Well, I don't have -- I don't have it precise.

But it is at least 35, and you said it increased?

Yes.

Second question, is just because as a shareholder I'm seeing the stock fall a little bit, and business just -- it sounds like business is pretty strong. I mean you answered PJ's question, so there is no hitches or anything else out there other than the facility being down for a while?

Right you are. I mean the short term temporary view focuses on clear lake. And longer term, I would point to two things, and one are the programs that we're executing against, building shareholder value, higher earnings power, in the company, and I think in terms of the Nanjing China investments starting up early and think in terms of the revitalization programs, and the comprehensive restructuring of the balance sheet, the use of the balance sheet to buy back shares of the company. Those things are moving forward on or ahead of our expected curve.

Second thing I would look at is frankly the very broad markets we participate in, and diverse markets and the broad global reach. You know, we do see an impact from North American housing. On the other side of it, we participate in Asia significantly, and the European economy is moving forward, and so we're balanced, if you will, to reduce this long-term volatility and short-term volatility. We think it is a very good picture out there for Celanese.

Your next question comes from the line of Mike Judd. Please proceed.

Thanks for taking my question. I just had a question about your new acetyl acid plant in China and it seems like that came up a little earlier than anticipated. How is that running? And are there any implications on the derivative units, you know, the vam unit, et cetera, et cetera? And just secondly, with that additional volume available, how is that additional volume being spread out geographically?

Thanks, Mike. The unit did come up earlier than expected and is running much better than expected. Today, we're running this facility at full capacity, and have been for a number of weeks. We were very pleased, as I mentioned in my prepared remarks, with the performance of our suppliers. Particularly the CO supplier that is running off of coal. We're just delighted with that.

The unit is running and supplying product primarily to the Asia region but in this environment, we're shifting products from all points of the world to help our customers in North America, and so you see some product flowing out of the Asia region, into the Americas, whether it be Singapore, or some product coming out of China from Nanjing. We view that as being a temporary situation, and obviously going forward, the Nanjing facility is built to supply the growing Asia market, which continues to have credible growth. -- incredible growth.

Okay. And the derivative units, are they still on schedule to come up at the times that you previously disclosed? Or are they coming up a little earlier than that?

Well, our projection right now is the units are on track and coming up, we don't have any surprises associated with those. We will get the remaining five of the six units that have been announced up within the next two to three years as projected.

Okay. And then with the zirconium clouding on the reactor, obviously making acetyl acid is an extremely corrosive environment, you know, given the carbon monoxide, et cetera, et cetera. Was the issue there that the maintenance hadn't been kept up? Or I mean what are some of the issues around how that problem developed, number one. And number two, with the patch that's being put on, you know, is this patch designed to basically be a permanent patch? And just, you know, any kind of details along those lines.

Okay. Mike, you know, obviously, there is a number of things that I can't share and other things I can't. And obviously you're right operating an acetyl acid plant is a very sophisticated and technically challenging thing to do. That's why we like this space. It doesn't lend itself well for people to slap up a unit that they get off of ebay or something like that. There is an incredible amount of chemistry, technology, and sophistication associated with. It the original leak was caused by what we call a mechanical issue. When that mechanical issue spread to a chemical or metallurgical issue, we were in a different environment. You know, the metallurgical or chemical issue is now -- I would characterize as what we're looking at now is more of a mechanical situation. And like I said, we are optimistic and look at it as being weeks out, temporary, not months or quarters.

So I mean basically, are you saying that since it was a mechanical issue, that once you put the patch on, that patch is good for, you know, forever, basically?

We've had mechanical repairs on reactors before, and the mechanical repair is not something that is new, and tends to be fixed and operates for an extended period of time, for years and years and years.

That's very helpful. Thanks.

Thank you.

Your next question comes from the line of Cheryl Van [Winkle]. Please proceed.

Yes, hi. I just wanted to get a little clarification on shares outstanding and not weighted average but right now, after you have completed your program acquiring shares, how many shares do you have outstanding?

Well, what I would look at is the -- on a fully diluted basis, because that is how we do our adjusted earnings per share, we actually have a table on the press release, so as of June 30, and again, it also depends on your stock price, and how you do the calculation, but we have 174.6 million shares outstanding on a fully diluted basis, and you essentially would take $1 million -- $11 million -- no, no you wouldn't because we actually had -- how many shares were purchased? We would probably take another 6 million shares out of that, I believe, because we probably purchased about 5, 5 to 7 million shares through the second quarter.

So I would take -- so I would take another 6 million shares out of that.

You're at 168.

Okay. This is is not -- this is actual fully diluted is the number that you would use.

Correct. We use for our adjusted EPS reported information.

And Cheryl, this is Mark Oberle. And I can walk you through the math. It will also be detailed in our Q that we will file here shortly. That will have a lot of detail for you.

Okay. Thank you.

Thanks.

At this time, I would like to turn the call over to Mr. MarkOberle for closing remarks.

Great. Thanks everyone, and thanks for your time and attention today. As always, if you have any further questions, feel free to call me or anyone else on the Investor Relations team. With that, we would like to conclude the call. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.