塞拉尼斯 (CE) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to Celanese Corporation's earnings conference call. My name is Sue and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes. I would like now to turn the presentation over to your host for today, Mr. Mark Oberle, Vice President of Investor Relations and Public Affairs. Please proceed.

Thank you and welcome to the Celanese Corporation's second-quarter 2008 financial results conference call. My name is Mark Oberle, Vice President of Investor Relations and Public Affairs. On the call today are David Weidman, Chairman and Chief Executive Officer and Steven Sterin, Senior Vice President and Chief Financial Officer.

As mentioned previously, this call will be recorded, so for those that were unable to hear all of the comments due to some of the other activity today, you will be able to hear the replay. The Celanese Corporation press release was distributed via Business Wire yesterday afternoon 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 economic, business, competitive, market, political and regulatory factors. More detailed information about these factors is contained in the earnings release and in 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 2008 earnings release references the performance measures operating EBITDA, affiliate EBITDA, adjusted earnings per share, net debt and adjusted free cash flow as non-U.S. GAAP measures. For the most directly comparable financial measures presented in accordance with US GAAP and our financial statements and for a reconciliation of our non-U.S. GAAP measures to US GAAP figures, please see the accompanying schedules to our earnings release, which will also be posted on our website, celanese.com.

This morning, Dave Weidman will review the performance of the Company and Steven Sterin will provide an overview of the business results for each segment and the financials. We will have a question-and-answer period following the prepared remarks. Now, I would like to turn the call over to Dave Weidman. Dave?

Mark, thanks very much and welcome everyone to today's call. I am delighted to share highlights of our strong second-quarter results and provide you with an updated outlook on progress we are making to grow the earnings power of Celanese.

Despite weak economic conditions and significant increases in raw material and energy prices, Celanese delivered strong results in the second quarter and we are reaffirming our outlook for the full year. Net sales were approximately $1.9 billion, a 20% increase from last year's results. Adjusted EPS was $1.20 per share versus $0.85 per share in the second quarter of last year. Operating EBITDA was $406 million compared to last year's $328 million.

The impact of escalating raw material costs and challenging market conditions on Celanese's performance is dampened by our portfolio of outstanding businesses, geographic and end-market diversity, leading technologies, advantaged feedstock positions and global, integrated business models. These factors substantially mitigate earnings turbulence while we focus on growing value.

Steven will provide you with further details about our second-quarter performance. I would like to share with you our outlook for the remainder of 2008 and beyond and why we remain confident in our ability to deliver on our earnings growth objectives.

For the last several quarters, we have discussed with our investors Celanese's growth strategy and our 2010 objective to increase the earnings power of our portfolio by approximately $350 million to $400 million versus 2006 levels. And we are delighted to report that we remain on track to deliver on these objectives. Our Advanced Engineered Materials businesses are creating a platform for increasing future growth momentum by working with our customers to develop new applications. We have seen a tremendous acceleration in AEM's collaborative development activities with our customers to develop solutions for their biggest challenges, including an increased focus on environmentally-friendly products and new application opportunities created by the high energy environment that we are in today.

Additionally, AEM is rapidly growing in Asia. In Nanjing, our new Celstran long-fiber-reinforced thermoplastic production unit and our new GUR unit successfully began commercial production this year. These facilities give Ticona the ability to directly service customers in this growth region and extend its global manufacturing capability.

Our Consumer and Industrial Specialties businesses are delivering on their earnings growth commitments as they continue to realize the benefits of their ongoing revitalization efforts. Plant rationalizations are on track and new product innovation, such as significant breakthroughs in environmentally-friendly applications, are being implemented. These businesses are demonstrating a higher level of sustained earnings performance.

Acetyl Intermediates is executing on its global expansion efforts. Commercial production of vinyl acetate monomer and acetic anhydride in Nanjing has begun. Production from these facilities will play a significant part in Acetyl Intermediates growth in 2009 and 2010. Long term, the potential expansion of the acetic acid unit in Nanjing provides even more opportunity to capture growth and drive productivity. This unique opportunity, combined with our advantaged feedstock positions in certain key raw materials and leading protective technology platforms, creates a truly differentiated intermediates franchise.

Our businesses have made significant progress in executing their growth strategies and with a proven track record of delivering on our growth objectives, coupled with our success in generating cash, we remain confident in our ability to increase the earnings power of our portfolio in line with our target.

Now, as I said earlier, our 2008 outlook for adjusted earnings remains between $3.60 and $3.85 per share, a significant growth over last year's results. Our first-half financial performance has been very good. Reasonable market fundamentals have helped fuel growth and support increased pricing levels in many of our products. However, as we look forward to the second half of the year, there is more uncertainty in the global economies and an opaque view of how the chemical industry and more importantly our customers will manage the rapid escalation in energy and raw material costs.

Now, as you know, Celanese is a company whose growth is driven more by global GDP than the economic performance in any one region or any one sector. We have seen the impact of the US financial crisis reflected in softened demand in US housing, automotive and construction markets and we are not optimistic about a rapid recovery.

Additionally, parts of Europe are experiencing economic slowdown. We believe Celanese is well-positioned to dampen the impact of rising feedstock costs and a weakening global economy. Our balanced portfolio of integrated businesses has demonstrated the ability to weather very well these types of conditions.

While we are cautious given the increased uncertainty in our outlook about the global economy and raw material and energy cost impact for the second half of the year, we reaffirm our full-year 2008 guidance for adjusted EPS of between $3.60 and $3.85 per share and operating EBITDA of between $1.35 billion and $1.415 billion. Celanese is a company that is in the process of executing a terrific plan to grow earnings and increase value for our shareholders. Today's environment may be challenging, but it also creates opportunity for Celanese to build for the future.

With that, let me turn it over to Steve.

Thanks, Dave. Let's start on page seven of the PowerPoint presentation that's posted on our website. Net sales were approximately $1.9 billion, up 20% from last year as higher pricing and overall continued strong demand, our expansions in Asia and favorable currency impacts drove the record performance. Operating profit more than doubled to $207 million in the quarter. Keep in mind that last year's results included approximately $105 million of expenses, primarily associated with a long-term management compensation plan and also reflected the impact of the unplanned outage at our Clear Lake, Texas facility, which we estimated had an impact of $0.05 to $0.10 per share on Q2 2007 results.

Net earnings were $134 million compared to a loss of $117 million in the second quarter of last year. You may recall that we completed a debt refinancing transaction in April of 2007, so those results included approximately $256 million of expenses associated with that transaction. Adjusted EPS for the quarter, which is more comparable as it excludes these one-time costs, was a record $1.20 a share, up 41% from last year's results. Strong volume in pricing, as well as higher dividends received from our strategic affiliates, contributed to the improved results. Operating EBITDA increased 24% to a record $406 million on strong operating performance and higher dividends from our cost affiliates.

As a result of our significant cash generation, in February, our Board authorized a share repurchase program. Through the first half of the year, we have purchased just under 3 million shares and have approximately $274 million remaining under this authorization.

Let's now turn to the results of our businesses beginning with Advanced Engineered Materials on page 8. Net sales were $300 million, a 17% increase from last year's results, driven by higher volumes and positive currency translation. The 8% volume growth was driven by our expansion in China and strength in non-automotive applications. These were great results considering a challenging US automotive sector, which saw a 10% reduction in automotive builds in the period.

Ticona was able to offset the impact of the decreased autobuilds through successful penetration and increased pounds per auto. In fact, we believe that Ticona was able to grow faster than the overall engineered polymers industry in the first half of the year.

Higher raw material and energy costs created some margin pressure for the business and offset the positive contributions of volume growth. Operating EBITDA was $68 million, $2 million lower than last year, primarily due to lower earnings from our equity affiliate.

On page 9, Consumer Specialties continued to deliver stable earnings and realized the benefits from its expanded acetate ventures in China. Net sales for Consumer Specialties were $292 million, a 4% increase over last year, driven by higher pricing and continued strong global demand, as well as favorable impacts from currency. However, the higher pricing of synergies from the acquisition of APL were offset by escalating raw material and energy costs. Operating EBITDA was $107 million, a 3% improvement year-over-year as we received $12 million of higher dividends from recently expanded acetate ventures in China. Keep in mind that we typically receive our dividends from these ventures only once a year in the second quarter.

Turning to page 10, net sales for Industrial Specialties were $386 million, up 9% from last year. This increase was primarily driven by favorable pricing and currency translation. Weakness in North American and Southern European housing and construction applications, while offset by continued strength in Asia, resulted in lower overall volumes. Operating EBITDA was $37 million compared to $34 million last year as the increase in sales more than offset higher raw material costs.

On page 11, Acetyl Intermediates' net sales were just over $1 billion, up 29% from last year. These record results were driven by higher pricing for acetyl products on continued strong global demand, volume growth from our acetic acid unit in Nanjing, China and favorable currency translation. Operating EBITDA was $227 million, up 53% as the higher pricing and increased volumes more than offset higher raw material and energy costs. Dividends from our Ibn Sina cost investment increased by approximately $14 million on the strength of methanol and MTBE margins.

Let's now turn to our equity and cost affiliates performance on page 12. The income statement impact is shown on the left side of the chart. Our affiliates delivered $92 million in earnings in the quarter, a 28% increase year-over-year. Higher dividends from our Ibn Sina and acetate cost investments more than offset the lower earnings performance from our AEM affiliates, which have seen the same margin pressures as Ticona.

On the right side of the chart, you'll see the cash flows from both our equity and cost affiliates. Total dividends received were $87 million compared to $59 million a year ago, also driven by the higher dividends from our cost investments.

Turning now to slide 13, our strong cash generation continues to differentiate us among our peers. Year-to-date, our net operating cash flows from continuing operations were $161 million higher than last year. Strong operating performance, higher dividends from our cost affiliates and lower cash taxes drove the improvement. Year-to-date adjusted free cash flow is $200 million, an $84 million increase from last year. We remain on track to deliver adjusted free cash flow of approximately $550 million in 2008. Keep in mind the adjusted free cash flow excludes all cash impacts related to the relocation of the Kelsterbach facility. During the second quarter, we received a progress payment from Fraport totaling $311 million and to date, we've spent approximately $62 million, primarily on capital initiatives associated with the relocation.

Slide 14 summarize our business outlook and 2008 guidance. As Dave mentioned, we are reaffirming our outlook for 2008 adjusted EPS of between $3.60 and $3.85 per share and operating EBITDA of between $1.355 billion and $1.415 billion. This guidance continues to be based on an adjusted tax rate of 26% and 166 million shares outstanding to reflect shares repurchased to date.

I won't go through all the details on this slide, but I think the key takeaways are, one, a challenging environment globally for raw material and energy costs, and two, continued softness in European and North American demand. These conditions drive a cautious outlook related to the economy for the second half, but shouldn't hinder our ability to deliver significant earnings growth in 2008.

As we look at our businesses in this environment, we would expect earnings to be pressured for our Specialty businesses while our Intermediates business continues to deliver strong results with its geographic footprint, advantaged technology and feedstock positions and attractive industry fundamentals. With that, I will now turn the call back over to Mark to open the Q&A.

Thank you, Steven. Susan, if I could ask you to give some instructions for the Q&A and we will begin in a second.

(OPERATOR INSTRUCTIONS).

I would like to remind everyone if we could keep your first set of questions to one question and one follow-up. Time allowing, we will be able to go back and get you back in queue for some more questions.

Edlain Rodriguez, Goldman Sachs.

Thank you very much. David, a quick question for you. We understand the current headwinds facing the Company and the industry -- slowing demand and higher costs. Given that, do you believe that Celanese is still positioned to grow earnings to the level you mentioned in the past -- namely 15% a year? That should get you above $5.00 by 2010.

Edlain, as we look out, we are very, very confident with the growth plans that we have. The $300 million to $350 million of earnings growth -- remaining is about $200 million, a little bit more than that in 2009, 2010. We are on track on that and executing against it. Strong cash generation in the Company was a very important part of that $5.00 concept and that remains very, very strong. And the only other question out there is what portends the economic environment in 2010? We view the world in 2010 as likely to be very, very similar to what we had in the first half of the year. We are confident.

Okay, good. A follow-up, can you please remind us what the timeline for the 400 million share repurchase is? And also would you accelerate that pace given the market reaction that we see today in the stock?

Sure, Edlain, Steven. So far through the year, we have acquired just under 3 million shares. Cash generation remains strong. We continue to be out in the market. We are taking a measured, opportunistic approach to share repurchase. We don't have a fixed timetable on it, but we continue to be out actively repurchasing shares.

I would just add to that. Our objective is to optimize the number of shares we purchase, not just to spend cash.

Okay, good. Thank you.

Kevin McCarthy, Banc of America Securities.

Yes, good morning. If I heard you correctly, you successfully started up your VAM and acetic anhydride units in Nanjing. Can you comment a little bit on the operating rates there and incremental sales contributions, if any, that you would expect in the back half? In other words, do you have to throttle back elsewhere as you bring up the new units?

Yes, Kevin, the units are up and operating on a commercial basis. We have product sales going out of them. Those then go into our global integrated network. We now have eight VAM units across the globe and we match our global production to the global demand. So we make sure that the production gets feathered into the market at an appropriate point in time and we optimize the earnings based on the costs and profit associated with different facilities.

Okay, so with these units up, and coming back to the question of your guidance and the overage in the second quarter, are there any Company-specific factors, Dave, that are causing you to adopt a more conservative posture for the back half of the year or are you looking exclusively at macroeconomic issues, such as industrial production in Germany and the US and elsewhere and cost inflation?

Yes, it is principally the macroeconomic environment. It is uncertainty associated with that. [You] can get a couple of things that we look at. Energy and raw materials, we feel confident in our ability to maintain margins, but the question is what is the impact on consumers. Remember, a year ago this week, oil was at $71.71 a barrel and wherever we are today is down modestly from the high, but it is still almost a doubling from where it was a year ago. The US downturn seems to be prolonged and spreading beyond just housing and construction into other areas.

You mentioned IPI in Europe and in Germany, we looked at that. Out in the world though, Eastern Europe continues to be strong. India is very robust. The Asia markets generally are holding very, very well, but it is, in our mind, an environment where the macroeconomics are more uncertain than they were 90 days ago. However, in spite of that, we are holding our guidance and delivering on value creation for the Company.

Thank you very much.

Hassan Ahmed, HSBC.

Good morning, Dave. A question around China. There are some recent reports coming out of China that, due to electricity supply and transportation restrictions I guess essentially stemming from the run-up to the Olympics, operating rates downstream are fairly low. Are you guys beginning to see or do you expect to see dramatically lower acetyl demand, particularly in China over the next quarter or two?

We have heard those reports. We've talked with some people who have seen them. It has not affected our business nor do we anticipate it affecting our business. Rates continue to be strong as demand continues to be strong and China continues to be a very, very positive picture in the world.

Super. Thank you.

PJ Juvekar, Citi.

Yes, good morning.

Hi, PJ. PJ, we can't hear you. Operator, it seems like we have lost PJ.

David Begleiter, Deutsche Bank.

Thank you, good morning. David, have you seen anything in June and July that would show a deceleration in demand or is your guidance just based on what you think may happen?

Dave, when you are in an environment where you are raising prices, it is hard to determine underlying demand. I will use the example Ticona. We had an 8% volume growth in Ticona in the second quarter. We had price increases in Ticona as well. As we look through that, hard to gauge, but we think that there is some lumpiness associated with demand, that underlying demand may not have been as strong as reflected in the actual reported numbers.

Things like that, Dave, cause us to step back and assess things a little differently and look at the world a little differently. Automotive production is an example. Coming out of principally the US, we see again and again that production levels continue to be ratcheted down and the model builds are transitioning from big units to small units. Actually smaller units, a number of the smaller units, we have more pounds per vehicle on those units than we do the bigger units, but there is a transition effect.

Having said that, we see a market in China and pricing in China that may have been a little bit stronger in the second half than we thought it would be and pricing holding up a little bit better in the second half than 90 days ago we thought it was going to be. So with that, Dave, I would say that we are cautious on the economy, but reaffirm our guidance for the year.

Understood. Can you give us an update on the next three acetic acid expansions at Sipchem, BP in Nanjing and SOPO, as well as your plans in Nanjing perhaps to double that unit size?

Good question. We monitor that and again, we will provide a comprehensive update here in December when we have our Investor Day. Overall though, we see slippages continuing with start-ups in the marketplace. I think in the second quarter, there were six or seven units that in our judgment had slipped. Some of them have some material slippage. So each one specifically -- I would rather not, Dave, comment on what is out there. Basically what we know is what we read in the press, but there does seem to be ongoing slippage in the marketplace.

Steve, any guidance on second-half dividend income?

Yes, we still expect to be within the guidance range we laid out. Think about total affiliate income between 200 and 215, maybe more towards the upper end of that range for the year. That takes into account both the cash dividends and the equity earnings piece.

PJ Juvekar, Citi.

Yes, hi, good morning. Can you hear me?

Yes, PJ, we can hear you now.

Well, thank you. I had a question on your table 7. You had this other adjustment that you added back to earnings. $24 million that you added back, $9 million business optimization, what is that charge and why is it one-time that you called out? Why is it part of your ongoing business?

Sure, we provide this table 7 to give you some transparency into our major restructuring activities in the business. At our Investor Day in December, we laid out plans to shut down five plants and to drive productivity in our back office in the administrative side. And these are the costs associated with those benefits. We don't have the costs in our guidance. We exclude them when we report actual results and provide them to you so you can see both the costs and the benefit.

When you look at that $9 million, those are mostly severance-related costs and office shutdown costs. One example is the consolidation of all of our financial activities from 20 locations down to one in Budapest, Hungary. So these typically are one-time, large transactions that drive significant productivity to the Company.

PJ, let me address the point that Steve has made here in a little different level. Celanese is a company that continues to drive productivity through our businesses and we spend money -- we think it is a wise use of investors' cash to spend money on restructuring and activities. These things -- two points. These things by their very nature are lumpy when they hit. Second, we want to provide total transparency to our investors on what is being spent, as well as the underlying business performance independent of that. That is why we split it out and I will allow you and other investors to factor those costs in in whatever way you feel is appropriate. But I would not categorize these as one-time. In fact, we don't in our writing say that they are one-time. They are ongoing. We have programs and initiatives on an ongoing basis to take costs out. It takes capital to do it, takes investor cash to do it and we will break it out and show you what we're spending and how we are spending it.

No, I agree, but if you consolidate financial IT systems into one location, you shouldn't be really adding that back into your adjusted EPS. I just think all the companies, everybody in the chemical industry is doing that. You are not alone. Everybody is adding this back.

Point taken, point made.

Okay. And the second question is on China, what was the impact around the benefit of the coal gasification plant in China and if coal gasification is being more profitable now than a year ago?

Yes, the benefit of coal gasification is -- we haven't disclosed due to some proprietary technology that we have and efficiencies in yields, but it is fairly substantial, PJ. The benefit of using coal is it places our Nanjing facility as one of the most low-cost facilities globally, if not the lowest cost, certainly the lowest cost in Asia. And as we continue to look forward to expanding that facility, it is done on the basis of that being a low-cost facility. We, in our mind, have gone through a justification based on productivity that supports growth rather than supporting growth principally due to that cost position.

And so if you decide to expand, you have enough coal gasification capacity to support that expansion?

Yes. There was an announcement made nine months ago, Mark, that the coal gasification supplier had committed to make an investment to expand that.

Sergey Vasnetsov, Lehman Brothers.

Good morning. Maybe you can talk about the current crisis in China. In light of the energy prices where they are right now, what is your outlook for the second part?

Sergey, the asset prices in China today are unusually high. I would say that in the second quarter of the year, they were somewhat higher, modestly higher than I had anticipated, we had anticipated. And right now, we see them stable at that point. I think in our view going forward, it was unusually high in the first part of the year and we would see it returning towards more normal levels going forward.

Sergey, in the second quarter, we had a couple of competitive planned and unplanned outages in the quarter and so our outlook will continue to be for a moderation of prices in China throughout the second half of this year.

Can you share some numbers?

Reported numbers where the prices in the first half were in the 700 to 750 range and we have probably talked about 650 to 700 being a level that brings it back down to the ethanol producers' economics.

Okay. You have shown some negative volume numbers on a couple of Specialty productlines. Is it those kind of lumpy orders where you see underlying weakness there?

No, here is what we see -- let me take Consumer Specialties first. That is our acetate business and our high-intensity food sweetener, Nutrinova business. And if you remember a year ago, we were producing flake in Canada for sale to our joint venture in China. Those flake sales were treated as third-party sales. That production unit was shut down and the production now is going on in Nanjing. So the economic benefit comes through dividends and we have a negative volume associated with that. Going into the second half of the year, that negative number won't be there and it won't be as large.

And then on the Industrial Specialties, we have taken steps to rationalize manufacturing on a global basis. We're in the process of doing that. And as we have talked about for a couple of quarters here at least, we do see weaker demand in those businesses, but on a sequential basis, we haven't seen any substantial change to demand from what we had in the first half of the year, the first quarter.

Okay, thank you for the help.

(OPERATOR INSTRUCTIONS). Gregory Goodnight, UBS.

Good morning, all. You mentioned optimization of your global system. I would like to explore your acetic anhydride plant, 100,000 tons. Will this allow you to move forward, for instance, with your Pampa plans? And the second question is how much savings is associated with this optimization? I imagine that you will have less shipping costs.

Yes, Gregory, good point. Basically, we are replacing the production capacity that is in Pampa for anhydride with capacity in the growing regions of the world, which is Asia. Modest opportunity to capture growth. And there are some savings costs, but all of those savings are consistent with our $350 million to $400 million earnings growth plan.

In terms of sizing it, I assume that that is a significant portion of -- I think you were targeting like $100 million in that bucket.

Yes, for the Acetyl Intermediates business, right, 2009, 2010 had roughly $100 million.

Yes, $100 million plus. Gregg, as you look at it, the three major components that we talked about were all related to the new units in Asia, the acetic acid units, the VAM unit and the anhydride unit. And they all contributed to the increased earnings power of the portfolio for that business.

Okay, any help on sizing what this incremental activity will provide?

Well, as we look at it, we said, on a rough basis in total, it produces about $500 million of additional revenue, $500 million to $600 million of additional revenue at 20% EBITDA margins. In our Investor Day book, we walked through which part is merchant and which part is captive. Clearly, the anhydride unit plays a piece of it, but I think the biggest piece, as you will see, would be VAM when it gets sold out by 2010 and the acid unit play a more significant financial piece.

I appreciate that help. The next question I had was in terms of Chinese capacity, there are reports that Shanghai -- [Wuxing] has restarted and idled a 250,000 metric ton plant. Can you confirm that and is that what is causing the Chinese prices to ease off a bit?

Yes, Gregg, good question. Let me characterize it this way. In the first half of the year, as we've talked about earlier, there was some planned and unplanned outages in the market. Even though they were unplanned, it is not unusual, as you know, in this business for facilities to go out. However, in that environment, pricing moved up somewhat higher than we might have expected. With those plants back onstream, with Wuxing in the marketplace, we expect pricing to moderate and move back towards levels that we had anticipated earlier.

Okay. Thanks for that help. I will get back in the queue.

William Matthews, Canyon Capital.

Good morning. I understand the guidance game can be confusing and send mixed messages. I just want to understand something. Leaving the guidance unchanged at roughly [372] midpoint, for the first half of the year, first two quarters, you are 30% above where you were the first two quarters of '07. So leaving the guidance unchanged would mathematically put you at a 12% decline versus the last two quarters of '07 or a 40 point swing from plus 30% to down 12%. So is there something you are seeing in the environment that is suddenly drastically changing your outlook or is it just more of the current environment gives you caution, therefore there is no need to raise the guidance at this point?

I would say the latter, Bill, and let me put a little texture in that. There is three elements that, when you look at the second half this year versus the second half last year, that you really ought to consider. The first is the fact that we had the Clear Lake outage last year. We indicated that, for the full year, that outage did not have a material impact on the performance of the Company. However, there was a decline in profits in the first half and an upsurge or a recovery of those profits in the second half as the unit came back on again. And we have quantified it at that time as roughly $0.05 to $0.10 of swing from the first half to the second half. So you are against that headwind in your year-over-year comps in the second half.

In addition to that, in our view, this pricing environment that we have -- when you have upward swings in prices, it is common for customers to order up and hold inventory ahead of price increases. So Ticona's growth is an example. It was 8% as we show. Underneath that, in our gut, but we can't point to specific customers, we believe that the number was somewhat muted and your second-quarter earnings this year were somewhat higher than they would have normally been at the detriment of what we might have seen in the third quarter -- third quarter in the second half of the year. Those are two elements.

On top of that is an underlying uncertainty associated with the economy. It is opaque. There is uncertainty out there. So when you factor those things in, I think you get a view of how we are kind of thinking about things.

Okay, and you gave somewhat of an update kind of on the supply side. How about the demand side of the model in terms of Acetyl Intermediates? Are you seeing any kind of erosion in demand? Obviously, we are seeing weakness in the US. We are hearing weakness in Europe. What about in Asia?

No, global growth in Asia holds up really, really well. In fact, as we look at it, there is a lot of great things going on out there right now. Demand is holding up in Asia really, really well. [Capacity] utilization within the acetyl chain is holding up well. Our growth plans are falling right in line as we anticipated, modestly better in some areas.

And in addition to that, we have reaffirmed guidance in this uncertain environment. The first-half, first second quarter were record quarters and record [caps] for the Company. So we remain confident in our ability to grow the earnings part of the Company. We remain very, very solid in our belief that we have got an incredibly strong business model, we have strong advantaged positions in our technology and our raw material positions. I guess the one thing that is a little bit different in our view is more short term, more cyclical and that is questions around the global GDP. And that is kind of where we stand.

Great, thank you.

Dhaval Patel, TIAA-CREF.

Hi, my questions have been already answered. Thank you.

Susan, do we have any other questions in the line?

You have a follow-up question from Gregg Goodnight from UBS.

I will be short. Would you comment on the legacy settlement, the $107 million? I assume that was all cash and I assume that is all there is and is going to be?

Yes, Gregg. Celanese is a company with a history and a past. There is a number of legacy items out there that have nothing to do with businesses that Celanese has today, but has everything to do with the corporate entity and history that we came from. I would just remind those not familiar with the story that when we demerged from Hoechst back in 1999, there was a significant amount of Hoechst, broadly speaking, Hoechst legacy items that were given to Celanese. We have been incredibly successful in one-by-one-by-one working those items off of our balance sheet and reducing substantially the exposure that our Company has to any of those legacy items.

There remains a few that we have out there that we are continuing to manage. We had two things this quarter. We had a legacy asset sitting in Germany in an industrial park over there and we chose to monetize that, move out of that asset. We had this legacy litigation associated with a fiber business that was sold back in '97 or '98, I don't recall exactly when it was. There was a settlement associated with that that seemed prudent. There is other litigation going on out there. There is other legacy sites that we have that we are considering the right disposition for them, whether they are strategic or core to us. So I wouldn't be surprised, Gregg, if you saw other items come in over the course of the next several years and we will continue to manage it as we can, but a substantial part is the exposure and the risk is in the past.

Okay, thank you for that help.

At this time, you have no more questions.

Great. Once again, we would like to thank everyone for the patience. I understand it has been a busy morning. If you have any follow-up questions, feel free to give me or anyone on the IR team here at Celanese a call. I look forward to talking to you again soon. Thanks.

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