塞拉尼斯 (CE) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Celanese Corporation earnings third-quarter 2008 financial results conference call. My name is Sandy and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of today's conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference, Mr. Mark Oberle. Please proceed.

Thank you. My name is Mark Oberle, Vice President of Investor Relations and Public Affairs and I want to welcome everyone to the Celanese Corporation third-quarter 2008 financial results conference call. On the call today are a David Weidman, Chairman and Chief Executive Officer and Steven Sterin, Senior Vice President and Chief Financial Officer. The Celanese Corporation press release was distributed via business wire this morning and is posted on our website, Celanese.com.

During this call management may make forward-looking statements concerning for example, Celanese Corporation's future objective 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 third-quarter 2008 earnings release references the performance measures operating EBITDA, affiliated EBITDA, adjusted earnings per share, net debt and adjusted free cash flow as non-US 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-US GAAP measures to US GAAP figures, please see the accompanying schedules to our earnings release which will also be posted on our website.

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, thank you, and welcome everyone to today's call. I'm pleased to have this opportunity to update you on our Q3 performance, give you what I hope is some insight into our markets in these turbulent times and underscore Celanese attractive long-term value proposition. Steven will summarize the financial performance for each of our businesses in a few moments but I'd like to take a brief moment to highlight our overall corporate results.

Net sales were approximately $1.8 billion in the quarter, up 16% from the same period last year. Operating EBITDA was $314 million compared to $302 million last year. Adjusted EPS was $0.78 per share versus $0.73 per share last year. Keep in mind that these results include approximately $15 million of the impact related to the safe and controlled shutdown and restart of our Texas Gulf Coast facilities due to Hurricane Ike.

We are pleased to report that our facilities and operations were not significantly damaged by the storm. However, the energy and power shortages triggered by the hurricane impacted and slowed the start up timing of many of our suppliers as they struggle to resume normal operation. At this point, however, we believe that the impact is behind us.

Three months ago I shared with you our views into the future and that it was opaque due to uncertainties around global economies. At that time it was primarily due to the probable impact that high energy, raw material and commodity prices could eventually have on our customers and their customers. Additionally, we started to see a slowdown in economic growth across the industrial base of the euro zone. During the quarter, European economies did continue to weaken while both our North America customers and Celanese felt the impact of Ike.

In Asia, demand for many of our products was sustained due to increased demand for some of our environmentally friendly low VOC products.

Now as the quarter progressed, concerns about inflation were replaced by heightened uncertainty relative to the US credit markets. Then in late September, these markets experienced a systemic crisis that we saw spread rapidly to other regions. This had an impact as individuals and businesses' ability to purchase was constrained by an overnight inability to fund their businesses as the credit markets halted. It also has fueled a dramatic change in consumer and in industrial confidence moving both groups into a wait-and-see mode as the crisis plays out.

This impact accelerated in early October. The raw material and energy prices have fallen in recent weeks. Demand today is softer in our end markets especially in Asia. And we currently believe it is unlikely these trends will change in the near future.

Though these are truly challenging times, it is important to reiterate Celanese focus on creating value and underscore why we believe that we are better positioned to prosper in periods of economic uncertainty than others. In fact, I believe it's critical for us to separate what is happening in the short term due to the impact of the credit crisis with the long-term strength of the Celanese business model.

There are many reasons why we remain confident in our ability to deliver value for our shareholders but let me highlight just three. Number one, the quality of our businesses. Number two, our fiscal discipline. And number three, our execution culture.

So now I would like to give you a little more detail on each of these, first the quality of our franchises. Our businesses have leading advantage positions. Our proprietary technology, advantage feedstock positions, end market diversity, and low-cost production capabilities allow Celanese to deliver superior returns. For example, through the first nine months of 2008, we have grown our operating EBITDA by 17% versus last year while many others in our space were flat to down.

One thing to keep in mind with Celanese' broad end market and geographic balance, many of our businesses such as the vinyl acetate monomer and emulsion businesses have faced soft market, trough-like conditions for several quarters now. Advanced Engineered Materials has seen extremely weak automotive demand and unprecedented raw material costs that have burdened their performance over the last several quarters.

And also let me remind you that our Consumer Specialties businesses which account for about 20% of our earnings have very little economic sensitivity. While there will continue to be challenging times ahead for some of our businesses, others are either stable or positioned for recovery.

Second is our fiscal discipline and balance sheet stability. Celanese has a long-standing track record of fiscal discipline putting the shareholders' cash to work in high return, high value creative ways. Much of what makes Celanese strong and successful today came from projects that were an initially developed during similar uncertain times in 2001 and 2002.

For example, our Nanjing complex was conceived and initiated in the 2001 timeframe. Since then, we've invested around $350 million in seven production units, six of which are already in production. And combined, these units will generate between $600 million and $800 million of revenue and between $120 million and $150 million of EBITDA by the time they are sold out. And this last quarter, we announced plans to build a new Ticona liquid crystal polymer unit at Nanjing. The eighth high pay back project on this site.

As we view the uncertainty caused by the credit crisis, we are committed to remaining disciplined. With the increased strategic value of cash and the ability to generate cash at a premium, we are very confident that Celanese can provide value for our shareholders during these challenging market conditions.

In fact, we view today's conditions as fertile ground for further strengthening Celanese leading franchises and accelerating our long-term strategies. We will continue to hold a high standard against all of our financial and strategic options whether it's M&A opportunities that will become more available in this market, high return growth or productivity projects within our businesses, or returning cash to shareholders through share repurchase. We will continue to be prudent, disciplined and measured in our actions to maximize value for our shareholders.

The third area that contributes to our ability to create value is our culture of execution and operational excellence. Our leadership team and all of our employees remain focused on the fundamentals. As I said earlier, in many cases there are more opportunities to create value during down turns than in expansionary times. Once again, whether it's increased focus on manufacturing productivity, cost improvement programs, helping our customers deal with a changed environment, or growth and expansion transactions, our Company's culture thrives on the challenge of identifying terrific opportunities in any economic environment and delivering improved results.

As we look forward to the rest of 2008, key questions remain regarding both the fundamental health of the overall global economy and the impact that the recent credit crisis has had and will continue to have on economic growth in the near term. Without the positive economic catalysts, we believe there will be a continued slow down in global growth which will likely be a headwind for our industry and our customers. As a result, we see this burdening our short-term performance primarily in the form of sharply lower volumes.

Given that, we are adjusting our full-year 2008 outlook for adjusted EPS to between $3.40 and $3.55 per share. Despite the challenging environment, our focus remains on executing our strategy, delivering on our strategic objectives and increasing value for our shareholders.

Now we plan on holding our next investor day in the spring of 2009 when the impact of the credit crisis allows the global economy a bit of time to stabilize so we can have a more productive and constructive dialogue with you.

With that, I will now turn the call over to Steven. Steve?

Thanks, Dave. Please turn to page six of the PowerPoint presentation that's posted on our website. First, our overall Company results. Net sales were approximately $1.8 billion, a 16% increase from last year's results driven by higher pricing, increased volumes in Acetyl Intermediates primarily related to our Asia expansions and continued strong demand from our environmentally friendly low VOC products as well as favorable currency impacts.

We experienced unprecedented raw material costs in the quarter with oil prices hitting levels north of $145 a barrel. Our prices, volumes and productivity gains more than offset these sharply higher costs in the quarter. Operating profit for the quarter was $151 million, up $4 million from a year ago.

The 2008 results included approximately $15 million of impact from Hurricane Ike, while the 2007 results had a near equal impact related to the unplanned outage at our Clear Lake Texas facility. This quarter's GAAP results included a benefit from a partial insurance recovery payment associated with the outage last year which offset costs related to the planned shutdown of our Pampa, Texas facility scheduled for early 2009.

Adjusted EPS for the quarter which excludes the insurance recovery and Pampa shutdown costs was $0.78, up 7% from the prior year. These results are based on 162.9 million diluted shares outstanding, a decrease from last year's share count of 167.4 million as we purchased shares under the authorized share repurchase plan. Operating EBITDA was $314 million, a $12 million increase from the prior year.

Let's now turn to the results of our businesses starting with Advanced Engineered Materials on page 7. Net sales were $272 million, up 5% from last year driven by higher pricing and positive currency impacts. We are seeing continued success in our expansion strategy in Asia and increase penetration in new automotive as well as non-automotive applications. But these could not completely offset the impact of sharply reduced automotive demand. Without the significant growth and penetration, volumes would have been much lower than the 6% decline we saw with automotive builds down 20% in North America and approximately 10% in Europe.

We are starting to see the benefits of our successful value pricing strategy as pricing improved by 6% in the quarter. This was not enough however to offset significantly higher raw material and energy prices. We would expect to continue to see positive pricing movement over the next couple of quarters as we continue to execute these strategies.

Operating EBITDA was $45 million, a $25 million decrease from last year's results. The Advanced Engineered Materials strategic equity affiliates were also impacted by the softening automotive demand and similar margin pressures which resulted in net earnings from the equity affiliate $6 million lower than last year.

On page eight, net sales for Consumer Specialties were $295 million up 5% from last year's results. Higher pricing on continued strong global demand for these products and positive currency effects drove the increase. Operating EBITDA was $56 million, up 6% from a year ago on the higher pricing and acquisition synergies that we have realized from the acetate product limited business.

The revitalization efforts have been extremely successful and have resulted in a higher level of sustained earnings. These businesses represent leading global franchises which are economically insensitive and continue to provide stable earnings and cash flows.

Turning to page nine, net sales for Industrial Specialties were $378 million, up 20% from the prior year on higher pricing and favorable currency affects. I am excited about the success of our revitalization efforts as we have optimized our manufacturing footprint and reenergized our new application development process to focus our efforts on higher value-added products.

While we are continuing to see softness in the North American and European construction markets, our focus on environmentally friendly applications using our new low-VOC emulsion particularly in China and growing demand for specialty polymers in the photovoltaic market has resulted in significantly improved results. Operating EBITDA increased to $36 million from $18 million last year.

On page 10, Acetyl Intermediates net sales were just over $1 billion, up 22% from the prior year driven by higher pricing and increased volumes. Operating EBITDA was $182 million, up $4 million from last year as the higher pricing and increased volumes were offset by higher raw material and energy costs.

While [van] demand continued to be soft in North America and Europe related to a slowdown in residential and commercial construction, demand for other acetyl products remained healthy. As Dave said, one interesting trend here is the increased use of our environmentally friendly low-VOC products in many applications. Dividends from our Ibn Sina cost investment increased by approximately $5 million on the strength of methanol and MTBE margins.

Our equity and cost affiliate performance are shown on page 11. I won't go through all the details on the chart; however, you see that our strategic affiliates continue to deliver stable results and significant value to our portfolio.

On slide 12, you can see that we continue to deliver strong cash. Net operating cash flow from continuing operations year to date is $335 million compared to $371 million last year. Adjusted pretax flow year to date is $195 million similar to the strong level seen a year ago.

Beginning with slide 13, I would like to turn now to a topic that I'm sure has become of interest in recent weeks and how (inaudible) value that Celanese has in its balance sheet and current debt structure. On the left, you can see the primary components of our debt, the most important of which is our $2.8 billion term loan we entered into in April of 2007. Keep in mind there are currently no maintenance covenants on these loans. We ended the quarter with $584 million in cash, so a net debt figure approximately $3 billion. Additionally, we have a committed and undrawn $650 million revolver facility spread across 25 different financial institutions. Overall, we view this structure to be cost effective, stable and flexible.

Slide 14 provides another view as demonstrated by the operating EBITDA interest coverage graph shown on the top left. As you can see, we continue to improve our coverage ratios. On the bottom left, you can see our long-term debt repayment schedule. Our term loans have bullet maturity in 2014 and only 1% annual amortization. With limited payments required over the next five years, you can see why we believe this debt is a real advantage in terms of stability. In addition, this debt is low cost at LIBOR plus 150 basis points.

To summarize our 2008 guidance, as Dave mentioned earlier, we are adjusting our outlook to between $3.40 and $3.55 a share and our operating EBITDA between $1.32 billion and $1.355 billion. This guidance is based on an adjusted tax rate of 26% and a full-year average of 165 million shares outstanding.

With that, I will now turn the call back over to Mark to open the Q&A.

Thank you, Steven. And Sandy, if I could ask you to give some instructions, we will get to the Q&A.

(Operator Instructions)

As we begin the queuing process, I will remind you if we could limit folks to one question and a follow-up in the first go round and if we have time, be happy to put you back in the queue and make sure that we get as many questions as we answer -- can get answered in the time that we have today.

David Begleiter, Deutsche Bank.

Good morning. David, if you could just go look at the Q4 guidance -- I think the midpoint is around $0.43. Can you do a waterfall from what you earned in Q3 of $0.75, how you get to $0.43 either by segment or by business line, where the declines are?

Happy to do it. Let me start first with our consumer specialties business. This is a business, acetate fiber going into tobacco filtration and high-performance food sweeteners. A very stable business economically stable, not a lot of seasonality in the business.

Our Advanced Engineered Materials business has a little bit of fourth-quarter seasonality to it but as we look at that, that is being less impacted than our Acetyl Intermediates business, which I will get to; principally because it has North American and European exposure and we saw most of the impact in the third quarter.

Our Industrial Specialties business, that has been in trough-like conditions for the last -- I don't know two years, let's say. We have gone through our restructuring program and also the program with new technology, having a good impact. And I would see rolling in the fourth quarter from third quarter sequentially a little bit of seasonality with that but relatively stable.

Our Acetyl Intermediates business is where there is a sharp volume pullback. And it's isolated largely to Asia and principally to China. Dave, we saw third-quarter volume and demand for most of our products primarily acetic acid holding up well. Prices were strong, demand was strong and had some good demand, good price stability, frankly out through the end of September. And then as the Chinese came back from vacation in early October, demand just dropped sharply is the word that we use.

As we look at it, there is probably two or three principal causal factors for it. Ultimately China exports about half of what they produce to Europe and North America and I think consumer sentiment driven by the credit crisis has affected demand. There is a very long supply chain in this market and our sense is that part of what we are seeing has to do with just inventory correction through a substantially long supply chain going out of China and into Europe or North America.

Another part of it has to do with what is going on in China itself. If you read steel reports and others, direct investment by the Chinese government, direct foreign investment has dried up to some degree and so there is impact associated with that. So we are continuing to sort it out and as we see the fourth quarter, that particular segment has increased in difficulty to forecast and predict demand. But this is driven largely by demand and not by new capacity coming in.

And as we look at it, we will get through it. We will see what the underlying causal factors are and provide some more clarity as we go forward.

David, in China, are some of the higher cost producers, the ethylene, ethanol based producers, are they shutting down or just producing at lower operating rates?

Yes, Dave, that is a great part of the business model that we have. There's about 10% to 13% of the production capacity that is very, very high cost, ethanol ethylene. All of that production is out of the market now and then there is another 13% to 15% that is very high cost but is based on methyl carbonylation technology; still a very high cost production capacity.

Prices have dropped to the point where they are now the marginal producer and they set the price curve. And as you will see in the press, the three principal ones in that region, Sopo, Wuijing and CPDC, have recently announced that they are considering shutting down their operations because they are into their marginal economics.

So as we look at it I think the underlying story here is that this wonderful cost curve that we have still is holding. It is being -- it's having the effect that we would anticipate and -- but the demand is down, David, the demand is down.

And just last, where are asset prices today in China, Dave, and where could they go in Q4?

Well they are in the -- they are in the $500 range. They had been $600 to $650 in Q3. They are in a $500 range now and that is where these producers are beginning to pull out of the market. Our projection is that we at least hold our market share during this period.

Thank you very much.

Kevin McCarthy, Banc of America Securities.

Good morning. Dave, how would you characterize trough margins in your Acetyl Intermediates business?

Gosh, that is an interesting question. Kevin, our trough margins historically -- I will take you back to the last trough that we went through in 2000, 2001. We were operating in the low double-digit range at that point. Now since that time, there's lower costs in our facility due to advantage from raw material positions. There is a modestly different competitive profile, we would say that there is more producers in the higher cost range than there may have been in the past.

So even though it's hard for us to project every economic downturn or trough that is shaped differently and looks differently, you've still got -- let me put it this way -- about 25% of the capacity out there that is high cost. And again, I will underscore one other thing, Kevin, and that is our fourth quarter view is that margins are relatively stable to what we saw in the third quarter but it is volume driven, it is volume driven.

So to follow up on that, given the sharply lower volumes you alluded to Sopo and the Taiwanese producer I think earlier in your comments. But given these sharply lower volumes, do you foresee any opportunity for capacity rationalization either among your competitors or within your own portfolio at higher cost facilities above and beyond what you have already announced at Pampa?

I will answer the last part of it first. We -- with Pampa out of our system, our group of plants, our portfolio of plants in aggregate have the lowest cost positions in the industry and within each of the regions they are very, very well positioned.

As far as rationalization within the industry, these prices certainly and these margin certainly do cause pause for some of the higher cost producers that don't have the advantage technology or the advantage raw materials that we have. I can only speculate what they will do. I would say though that alluding to some earlier remarks and my comments and in Steve's comments, we view environments like this as being great opportunities for -- to move our strategy forward. You have opportunities in this type of environment that you would never have in an expansionary economy.

We do those things real well, Kevin, and we are positioned with the balance sheet, the resources, the culture that takes advantage of these opportunities to move our strategic direction forward rapidly.

Thanks very much.

PJ Juvekar.

Good morning, David. Can you just tell us how much of your production in China stays back in China versus how much is exported?

Our acetic acid in China is very broad-based and serves broad economies. We've got a bunch of it going into polyester that ends up in either textile or plastics. You have a bunch of it going into coatings and adhesives applications that end up in either construction in the market or in furniture and other products.

I would tell you that we haven't traced the molecule with any precision but we think we are roughly what the Chinese economy is which is on manufactured goods about half stay in the country and about half go out.

What are you seeing in terms of domestic demand there since you have such big operations and a good window into that economy?

There are three elements of demand drive in China. One is domestic consumption for let's call it Chinese customers or consumers. So far we haven't seen a marked change in that. The malls all still full of -- people seem to still be buying. There still seems to be a level of confidence that get a consumer out there purchasing and doing the things they are doing. Remember the Chinese don't have 401(k) programs and most of them don't own their homes. So there hasn't been the psychology and wealth destruction that there is in Europe and North America.

The second element is government spending and you have seen that the government has slowed down spending beginning in 2006 and one-quarter of two ago, they began to reverse that trend. I think most reports coming back would say that they were slow in doing that; infrastructure build has slowed down fairly significantly. That is more of a -- I don't know quarter two, quarter three story than just here in quarter four.

But the last element truly is export and it feels to us that this is an export driven phenomena going on in China and it also feels to us that through the entire supply chain from us to our customers to their customers putting it on a boat, shipping it out of China, going to North America or Europe, there is a substantial amount of inventory correction going on through that very, very long chain.

Great, thanks for that. One quick question for Steve if I may. Quickly, on your term loan, it's LIBOR plus 150 basis points. Given the volatility we have seen in LIBOR rates, how are you managing that? And eventually -- I know this is low interest rate, but eventually do you want to put [former] financing in place? Thank you.

Yes. So when you look at our financing structure today, when we talk about stability, we've got stability in the repayments but we also have it on the interest cost side. About three quarters of our debt is at fixed rates so we were able to lock in last year at a pretty good interest rate. We are averaging about 6.25 today on the overall company basis so not a lot of volatility coming out through interest.

Yes, longer-term covenant-like term lens, availability of those in the 2013, 2014 time frame. No certainty but as you can imagine, probably won't be those types of financing structures. So as we continue to move out looking at the opportunities Dave has talked about, preserving cash for those opportunities and also looking at long-term capital structure, we will look at a number of different capital structure opportunities as we get closer to the end of the term loan program.

Next question.

Frank Mitsch, BB&T Capital Markets.

Good morning, gentlemen. Dave, you talked before about the highest cost capacity in the acetyls chain in Asia coming off the line and prices having dropped $100, $150 a ton there. And then you suggested that right now at the $500 level, we are near the break even cost for that next tranche of high cost capacity. Can you talk about what level if in fact these guys shut down, what level might pricing drop down to afterwards? How likely that would be? And then if you could just offer a thought or two on where operating rates were in the third quarter and what your expectation is for the fourth quarter?

Okay, you had three questions there. I will try to remember all three of them. In the 550 range, you've got -- or in the 500 range, you have as I said before somewhere between 10% and 13% of production capacity that is -- as the next tranche, and then after that it kind of feathers in and should move down -- as you move down the price curve or the cost curve. Those that are up in the higher range are three manufactures. They tend to be more larger facilities but there are a number of others that are kind of feathered down off of that.

So it is more of a -- a more gently declining slope than going from the ethanol ethylene guys down to this first tranche of methyl carbonylation people. The other element here is capacity utilization. In the fourth quarter, the industry was running 92% to 95%. It was fairly high and then you've got -- that was the third quarter. In the fourth quarter it's really hard to determine what is going on in the fourth quarter. We would say right now based on what we are seeing that you are probably in the 75% to 85% range, but with only three weeks in the quarter, it's hard to get a lot of precision on it.

And given this outlook for the fourth quarter, what level of confidence do you have that that improves in Q1 or Q2 or do you not have any confidence that it is going to improve that quickly?

Well, if Q4 is difficult to judge at this point 2009 is very, very difficult nearly impossible. Where we are trying to get a sense of what 2009 is going to look like, in my mind, Frank, there was a weakening global economy prior to the credit crisis. And then you had the systemic failure in credit and it basically threw all trend lines off. And as we look at it, it will take a while for us and I think a lot of people to sort out how this systemic failure of our credit markets affected consumer confidence, business confidence and the ability for people and businesses to borrow and do business.

And so we are in the process of sorting that out and as I said, as we go forward here, we would anticipate being able to give a view of 2009 as we released our fourth-quarter results.

Great. And then lastly, any expectation of new capacity in 2009?

In assets?

Yes.

No, we've got some capacity that comes in at the end of the year but there's a couple of guys that have some units coming up toward the end of the year or early 2010. We keep hearing -- end of 2009, excuse me, early 2010. We keep hearing about delays in some of that capacity but 2009, no new [apps].

Great, thank you.

Edlain Rodriguez, Goldman Sachs.

Good morning. Dave, quick question for you. Your exposure to Asia has always been a strong positive. Not that we are seeing a slow down there, can you address concerns that this will be damaging to the attractiveness of the portfolio going forward?

Well, you know, Ed, we've always felt that China was -- a fundamental part of our strategic pillar is to follow our customers and be in the markets that they participate in. The markets are growing in China like any other region of the world. We have also judged that China will continue to expand but the path forward will be lumpy. We are experiencing one of those bumps in the road right now.

In my mind for the strength of the company and the businesses, if you don't grow you are on a pathway to bankruptcy. That is an extreme statement but we are forward leaning. We are growth oriented and being in these markets with the lumpiness associated with it is something that occurs. My judgment is that the Chinese basically are unseasoned capitalists at this point. And mind you for the last 20 years, if you could make it in China, you could sell it and export it. This is the first point in time I believe where there has been a step back in demand that has forced a lot of Chinese producers, not just at our level but through the chain, to check that basic assumption.

And with that there will be my belief more stability in the market, a more seasoned environment and these types of disruptions I believe are -- they will occur but I think they will be less dramatic than what we believe we are seeing at this point.

Okay and a quick follow-up. Can you talk about your appetite for further share buyback?

Yes. I am happy to do that. We did do a share buyback in the second quarter and in the third quarter. As we looked at it, there are opportunities we believe that will present itself now that will be higher value for shareholders than share buyback even with these absurdly low share prices that we have today. We have always been and we will continue to be disciplined in the way that we approach the use of the shareholders' cash. And we will always look at the opportunities in front of us and spend the shareholders cash in the most disciplined and most attractive way possible.

Thank you.

Gregg Goodnight, UBS.

Good morning, gentlemen. By near term opportunities, what are you saying -- are you implying that maybe there is some M&A on the horizon that you could possibly take advantage of now?

Gregg, I would answer that in environments like this, contrasted with environments that we just came out of, there is probably more people willing to do things than there have been. We certainly know that to be the case if we go back to 2000, 2001. We were able to buy [acetics] as an example, set that up back in that period of time. We did our downstream acquisitions and emulsions and the PVOH business during that period of time.

We think based on not only the strategic value but the financial value, those were incredibly attractive acquisitions. So though we don't have anything specific to talk about, we can tell you that we have our heads up, our eyes open and are looking for opportunities.

Okay. Great. As a follow-up to Frank's question, you mentioned operating rates in Asia right now are in the mid-70s range. Those I assume are industry operating rates. Commenting specifically on your operating rates, are you able to optimize your Singapore, Nanjing distribution where you can run -- say one plant harder than the other? Or can you give us a summary of how you are managing production from those two units?

Well, as I indicated, we are three weeks into the quarter and it's hard for us to judge what the rates are going to be across the industry for the quarter. I said 75% to 85% but definitely we are the first few weeks have been very low demand period. But, yes, Gregg, I mean that is one advantage of a company like Celanese. We are able to optimize our integrated acetyl chain. Not only are we able to produce out of the lowest cost facility, but we are also able to move our product into the most attractive end-use markets whether it be all the way downstream to an emulsion market or to a vinyl acetate or to an anhydride market. And our guys are on top of it and are coordinating these things.

There is internal processes that have a daily cycle on some of them, a weekly cycle on others but steps back through its supply-chain effort moves products from the most attractive facility to the most attractive market.

Am I correct in assuming that you would run Nanjing harder and if there is a cutback potentially Singapore would be the swing unit?

Nanjing is our lowest cost facility in Asia.

Okay, enough said. Thank you very much.

William Matthews, Canyon Capital.

Good morning. As recently as September 26, you affirmed full-year guidance. And then I think you mentioned in your comments after a vacation break in October when things resumed that gave you information that caused you to reduce the full-year guidance. So given that it is only October 21, can you give us a sense of how that progressed and why you had such certainty to take down the quarter?

Sure, sure, sure, happy to do it. You know the impact of the credit crisis has moved its way through the system here only over the last three or four weeks in our view. As we came out of September and looked at not only demand but also pricing that we were seeing in Asia, things were strong. Pricing was in peracetic acid -- that is kind a marker for demand because Asia pricing tends to be spot short term. But pricing there was holding in the 6 to 650 range and then the vacation and as folks came back from vacation basically orders just stopped. There was just not a lot of demand out there.

And with that, our prices began to drop and there's a lot of reports out there that, [Isis] and particularly that reports on what Asia pricing is doing and it continued to fall through the 600 range into the 550 -- 5 to 550 range where it is out there and stabilized today.

So and as we talked with our customers and tried to get a look through the system down to the customers' customers, there is a dramatic drop off -- a sharp drop-off in fundamental demand and it is having a broad-based overall impact through the industries that we serve.

As we -- as we look at it, that is what has happened. And as I said, we are three weeks into it. How much of this is driven by fundamental demand, drawback in Europe or North America or China, how much of it is inventory correction within the chain, at this point in time, we are still trying to sort that out and understand what the dynamics are.

We do know that there is significantly decreased consumer confidence and business confidence. The credit is tighter. Both the willingness and the ability of people to buy based on what they saw in the last part of September in the credit markets is having an effect and having an impact.

Okay then if you think about demand in China internally kind of in three buckets, one, internally generated demand. Two, demand generated from government spending; and three, demand related to export. I was under the impression that most of the product that you produced in China was for the former two and not for the latter but that doesn't seem to be the case given your comments. It seems like you do have substantial exposure to the export economy. Is that correct?

We produce in China for China but the customers that we produce for is either themselves or principally to others produce products and we think we are pretty closely tied to the Chinese GDP so about half of China, we look at it as export-based. So we sell product that eventually ends up in fiber, fabrics, textile applications that gets made in China and exported. We end up in furniture, some of it is used internally, some of it is exported. We end up in water bottles that are principally used inside of China. We end up in coating applications that principally end up inside of China for houses or offices there.

So that is the basis of sales that we have had. But you are right in saying that most of our product, in fact all the product that we make in China we sell in China so there is some end market exposure associated with where those products eventually end up and finally being consumed.

Okay and then final question. Cash balance is now at about $580 million, net debt $3 billion. What are the numbers that you feel comfortable with that we can kind of model in as your minimum cash balance or maybe what leverage you are comfortable going to?

Yes, you know where we are today, we are comfortable with our balance sheet both in terms of the amount of cash it takes to service our debt and the terms of our debt. Cash balance, we've got a nice cushion. Think about minimum cash needed to run the business of $250 million to $300 million to continue to generate and invest in the business. As Dave said, cash is at a strategic premium today so I think cash available for these opportunities we've talked about is a priority for us.

Okay, so the cash available then would be around $250 million to $300 million to spend on these opportunities?

Roughly.

Okay, thank you.

This concludes the question-and-answer session. I would now like to turn the presentation over to Mr. Mark Oberle for closing remarks.

Thank you and thank you everyone for joining today's call. As always if you have any questions, feel free to give me or anyone on my IR team a call. We'd be more than happy to continue the conversations. Thank you very much and we will look forward to talking to you soon.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a great day.