塞拉尼斯 (CE) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Third Quarter Celanese Corporation Earnings Conference Call. My name is Katie and I will be your coordinator for today. At this time, all participants will be in a listen-only mode. We will be facilitating a question and answer session towards the end of the conference. (Operator Instructions). I would like to hand the call over to Mr. Andy Green, Vice President of Investor Relations. Mr. Green, over to you, please.

Thank you and welcome to the Celanese Corporation Third Quarter 2010 Financial Results Conference Call. My name is Andy Green, Vice President of Investor Relations. On the call today are David Weidman, Chairman and Chief Executive Officer and Steven Sterin, Senior Vice President and Chief Financial Officer. Also in the room today are Doug Madden, Chief Operating Officer, and Mark Oberle, Senior Vice President, Corporate Affairs.

The Celanese Corporation third quarter 2010 earnings release was distributed via Business Wire this morning and is posted on our website, celanese.com. The PowerPoint slides referenced during this call are also posted on our website. 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. The limitations inherent in such forward-looking statements are detailed on page seven of the earnings release referenced during this call.

Celanese Corporation's third quarter 2010 earnings release references the performance measures operating EBITDA, business operating EBITDA, proportional affiliate EBITDA and affiliate EBITDA, adjusted earnings per share and net debt as non-US GAAP measures. For the most directly comparable financial measures presented in accordance with US GAAP in our financial statements and for a reconciliation of our non-US GAAP measures to US GAAP figures, please see the accompanying schedules to the earnings release as posted on the website at 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'll have a question and answer period with Dave and Steven following the prepared remarks.

I'd now like to turn the call over to Dave Weidman. Dave?

Andy, thanks and welcome everyone to a very busy day and to our call today. I'm really excited to share with you the results of a very strong quarter, in fact, Celanese's third -- best third quarter EPS ever, and also to increase our earnings outlook for both full-year 2010 and 2011.

Our third quarter performance underscores our transition to the technology and specialty materials company. Net sales were $1.5 billion, up 15% from last year. Operating EBITDA was $286 million versus last year's $240 million. And adjusted EPS was $0.88 per share, an increase of 52% from last year.

Our exceptional performance in both sales and earnings was driven by sustained healthy demand across all segments and regions, continued strong contributions from our affiliates, and the benefits of our fixed cost reduction initiatives. As we previously highlighted, our affiliates are both strategic to our operations and significant to our earnings. When you include the unconsolidated proportional revenue and EBITDA from our equity affiliates, our total revenue and total operating EBITDA were $1.9 billion and $322 million, respectively.

Now, looking to the fourth quarter, though we anticipate normal seasonality, we continue to see strength in the global economy and are experiencing healthy demand across all business lines. Given this positive momentum and building on our strong performance year-to-date, we're raising our outlook for the full year. We now expect to deliver adjusted earnings per share of at least $1.55, higher than last year's $1.71 and operating EBITDA of at least $270 million higher than last year's $847 million. This positive momentum should carry us into a very good 2011.

And though we remain confident in our ability to grow next year's operating EBITDA by at least $150 million more than 2010 levels and adjusted EPS by at least $0.60 per share more than this year's results. We remain on track to increase the earnings power of our portfolio to $1.6 billion to $1.8 billion of operating EBITDA by 2013 by relentless focus on four key efforts. First, to expand in fast-growing geographic areas. Second, to accelerate revenue and margin expansion through innovation. Third, to lower fixed and variable costs through continued focus on productivity. And fourth, to identify and execute value creative portfolio enhancements.

As we outlined at this year's May Investor Day, these four levers value creation are foundational to our ongoing transition to a stronger far more valuable company. A company with sustained earnings growth of 10% to 15% per year, higher relative margins, lower earnings volatility throughout normal economic cycles and return on invested capital, which far exceeds our weighted average cost of capital. This is the Celanese model for technology and specialty materials company, a business model that creates significant value for our stakeholders in both the short and the long-term.

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

Thanks, Dave. If you'll turn to slide seven of the earnings presentation, I'll review third quarter performance and the outlook for each of the segments beginning with Advanced Engineering Materials. This business continued to perform very well and in line with our expectations, and we see this continuing into the fourth quarter. AEM experienced significant year-over-year volume growth driven by increased demand in all three regions for our high performance polymers and continued successful commercialization of our robust pipeline of innovative new products and applications.

Net sales for this segment were $271 million, a $51 million increase from the prior year. Volumes up 22%, which more than offset modest headwinds due to currency movement. These quartered results also included sales from our FACT LFT business that we acquired last December. Operating EBITDA was $90 million in the quarter, $17 million higher than last year's results. Equity earnings for AEM's strategic affiliates totaled $31 million, $3 million higher than last year's results.

As we look ahead to the remainder of the year for this segment, we expect strong year-over-year improvement in earnings and margins to continue even as sequential demand levels are expected to reflect more normal seasonality. We should also see continued growth and earnings from our equity affiliates on strong performance in Asia. As you'll recall, due to the expansion of the Frankfurt Airport, we are relocating AEM's Kelsterbach manufacturing operations to our Hertz, Germany site. As part of this move, the Frankfurt Airport agreed to reimburse Celanese a total of EUR 670 million. The transition is expected to be complete by mid to late 2011.

As we said previously, we plan to invest additional capital beyond the proceeds received (inaudible) supply the long-term growth expected for this business. This includes investments for 40% additional capacity and ongoing lower operating costs, which will create significant value for your shareholders. We are building inventory in order to support our customers' needs and to minimize any supply disruption during the transition. We expect this to continue through the fourth quarter and into 2011. Although this inventory build modestly reduces the amount of product for sale externally, the segment continues to see strong demand, and our growth outlook for the business remains very positive.

Let's turn to Consumer Specialties on page eight. These businesses continue to deliver very strong performance as global demand increased, particularly for our acetate products. Net sales in the quarter were $288 million, up $17 million from a year ago. Our EBITDA margins in this business expanded to 28% driven by 8% higher volumes and the benefits from our sustainable productivity initiatives, which more than offset higher energy costs. Operating EBITDA rose to $81 million, up $13 million from last year. In the fourth quarter, we expect normal seasonality with year-over-year improvement in earnings and margins.

Turning now to Industrial Specialities on page nine. Net sales were $276 million, $40 million higher than a year ago. Volumes were up 12% year-over-year driven by strong demand, particularly in North America and Europe, and the availability of EVA performance polymer production which was impacted by an outage at our Edmonton, Canada facility during the third quarter of last year. China demand remains strong as well, and our VAE expansion in Nanjing remains on track for mid 2011. Overall pricing was up 11% across these specialities materials businesses as recently announced price increases were realized in our innovation efforts drove an improved product mix. Operating EBITDA rose to $36 million, up $7 million from last year. In the fourth quarter, we expect to see normal seasonality in our earnings and margins and continued benefits from our pipeline of new applications.

Turning now to Acetyl Intermediates on page 10. Net sales were $777 million in the quarter, a 17% increase year-over-year largely due to higher volumes. The 12% volume increase was driven by strong demand across all regions. Pricing was up 9% year-over-year due to higher pricing in VAM and other derivative products.

Operating EBITDA was $110 million, $23 million higher than a year ago, as the higher volumes and pricing more than offset higher raw material costs and currency effects. This quarter's results also continued to benefit from our manufacturing realignment efforts mostly related to the closure of our acetic acid and VAM operations in Pardies, France. Looking forward, we expect to sustain this level of performance in the fourth quarter.

Results of our strategic equity and cost investments are highlight on slide 11. The left side of the chart shows the earnings impact of our affiliate performance. Year-to-date results were $204 million, $89 million higher than the same period last year. Our AEM affiliates delivered strong results as they experienced higher demand in the Asia region and our Ibn Sina affiliate delivered strong earnings growth.

The right side of the page provides more detail on our strategic equity affiliates. The bottom bar represents our share of the net income of these affiliates that's included in our numbers. The top part is our proportional share of these affiliates EBITDA, which does not get included in our operating EBITDA. As you can see here, our total proportional EBITDA is substantially higher than what is included on our numbers, and is up approximately $100 million more than last year. More detailed results on our affiliate performance and our proportional share can be found in table eight of our earnings release.

Now, if you will turn to slide 12, I would like to review the strategic capital structure transactions that we completed in the third quarter. We executed four distinct transactions. First, we took advantage of attractive bond market conditions by issuing $600 million in senior unsecured notes at very competitive rates and used the proceeds to pay down the equivalent amount of term debt.

Second, we amended and extended a portion of the term line such that we now have approximately $500 million due in April of 2014 and $1.4 billion that now matures in October of 2016. As part of the amend and extend, we also paid down $200 million of term debt using cash on hand. Third, we amended and extended our revolving credit facility, which now matures in October of 2015 versus the original maturity of April 2013. In the term loan and revolver transactions, we preserved our advantage covenant light structure.

And lastly, we executed a $1.1 billion forward swap agreement, which locks in LIBOR at 1.71% beginning in January of 2012. This two-year forward swap agreement compares very favorably with our existing swaps, which I will discuss in more detail in a moment.

If you'll turn to slide 13, you will see the next effect of these transactions on our debt maturities and interest costs. The top two charts illustrate the improved maturity schedule for our debt and the net effect of our debt refinancing. The third chart at the bottom of the slide illustrates the net effect of our debt refinancing on expected interest costs through 2012. In 2010, the effect is minimal given the transactions timing late in the fiscal year. In 2011, we expect net interest costs to be approximately $225 million.

In 2012, we see the significant benefit of the forward swap agreements. These transactions are consistent with our ongoing strategy to maintain a flexible, low cost and stable capital structure and significantly improve our long-term financial position.

Turning to slide 14, you will see our outlook for free cash flows for the remainder of the year. We continue to generate strong free cash flow in 2010 and currently maintained about $700 million in cash available for strategic activities. During the corporate quarter, we repaid a net of approximately $200 million in debt, repurchased $21 million of common shares, and paid $8 million in dividends.

To summarize, in the third quarter we saw strong demand across all of our business lines. And based on our order activity, we expect this positive momentum to continue throughout the fourth quarter and into 2011. As a result, we have increased our 2010 EPS outlook by at least $1.55 versus last year's EPS of $1.71, or at least $3.26 for the full year 2010. We also continue to realize the benefits of our strategic initiatives in six cost reduction programs in the form of earnings growth and steadily expanding margins.

To reiterate what Dave said earlier, we remain confident in our ability to create shareholder value as we continue to deliver the strong financial and operational performance of a technology and specialty materials company. With that, I'll now turn the call over to Andy for Q&A.

Thanks, Steven. Before I turn the call over to the operator for Q&A, I'd just like to remind everyone that we would like you to limit yourselves to one initial question with one follow-up, and if you have any additional questions, you can always back in the queue. With that, I'll turn it over to Katie.

Thank you. (Operator Instructions). Your first question comes from the line of Robert Koort from Goldman Sachs. Please proceed.

Thank you, good morning.

Hey Bob.

A couple of questions. First, maybe, could you just comment about recent start of a new capacity in acetic and what affect that's had at all on the market? And then secondly, Steve, could you give us a sense into going into next year what your first cut at CapEx and/or pension deltas might be?

Okay. Yeah, Bob, let me start on the first question, and Doug can follow up on it. Then I'll have Steve talk about next year's views on some of those cash elements. The acetyl market is holding very strong. In fact, price announcements are out in most of our products in the acetyl space.

Some of the new -- most of the new capacity that was anticipated is up and operating in the marketing if they're economical. I think the most noteworthy thing is that BP's facility, according to market information, is up and operating. We're not quite sure where they're running, but they seem to be running at fairly decent rates, even with that new capacity coming into the market prices are moving up. Doug?

Bob, this is Doug. You are seeing some prices move up, you know, the incremental producers there are seeing a run-up in their methanol in the near term, so you see modestly prices going up north of $400, but I think as Dave said, you're seeing the guys who are not able to run have cut back. You see a variety of a capacity that's been taken out and those that can't run are either curtailed or down. And we think it's significant with BP in the market already that we still are encouraged with how the curve is operating. In our technology, it enables us to be able to continue to run full when the market is somewhere in the low 80% range.

Steve?

Bob, we'll be providing some more granularity on 2011's cash flow elements between now and the end of the year, so we'll provide you some detail on CapEx and all of the other items that relate to the EPS guidance and EBITDA outlook we've provided out there. In terms of pension, we've already --

Steve, that will be done --

That would be done between now and the end of the year. Regarding pensions, the P&L impact, you know, there's still movement in discount rates, but based on our latest view of that, we've already got that included in our number and we've offset that with the growth and productivity innovation programs to the $150 million of incremental EBITDA already covers the incremental pension from a P&L perspective. And like I said, we'll provide some more transparency into the cash outlook for next year by the end of the year.

Great, thank you.

Thanks, Bob.

Your next question comes from the line of David Begleiter from Deutsche Bank. Please proceed.

Thank you. Good morning.

Hey, Dave.

Hey David, could you discuss your operating rates at your acid facilities, especially the one in Texas right now?

Yeah. I mean, Bob, or Dave, we're running our plants essentially full. We're running as much as we want to which, you know, takes into account normal plant turnarounds and things. But we are running full across the system.

Fair enough. And just on an industrial specialties, a good margin improvement in the quarter, what's the track or the path to a double digit margin in this segment on an EBIT basis?

Dave, this is Doug. You know, we continue, as you can see, to make solid progress when you look year-over-year and sequentially with the quarter with that business. Overall, we continue to see volumes in all three major regions of the world around some of our leading technology.

We've been able to see good price movement. As we told you, I think, over the last couple of quarters, generally it takes us time to recover when we see periods of rapid escalation in raw materials and you're seeing that momentum over the last couple of quarters and we expect that to continue forward.

In addition, this is a space, as you know, that we've got strong technology around a lot of our innovation efforts and we've been able to bring those products into new markets, new applications and in the case of new regions of the world into China with the new plant that we are starting up. So we're on a solid pathway; we think that we've got the right formula for success and stay tuned.

Thank you very much.

Thanks, Dave.

Your next question comes from the line of Frank Mitsch from BB&T. Please proceed.

Hey, good morning. This is Sabina Chatterjee in for Frank Mitsch. I was just calling asking what you saw in the auto end market in Q3 and maybe what your outlook is for next year?

Yeah. I mean, auto demand was relatively strong in the third quarter. I'd say that we were pleasantly surprised by the strength in the auto space, particularly in Europe, that seemed to be strong. When we look into next year, our view is no more insightful than what gets published out there, so I think we would stick to the normal guidelines that are out in the marketplace.

That's certainly what we hear from our suppliers, you know, some respectable growth going forward. It certainly feels to us that inventory levels are not out of line, so I think we're in a pretty good space. Doug, do you want to add to that?

Sabina, let me also add, as you probably know, we think in our model is two things. One is around the production of the autos. And as we've always said, the number is important, it's not who. More importantly, if you look at our Ticona model, the second part of that is the penetration that we make in putting more value on every car. And a substantial amount of our ability to continue to grow at three times GDP in that space has a lot to do with our capabilities to put more value on a vehicle. So we remain encouraged, and frankly as more builds occur that's upside, but our ability to penetrate with our product is a key part of our advantage.

Sabina, I'll add to Doug's comment. What we have noted during the down period is that the auto companies have not stopped being innovative. In fact, it feels to us as though they're putting more innovation on platforms in the future. Our pipeline of innovative opportunities is significantly larger than it's ever been. We're, in fact, adding people to handle the demand, not just in the automotive space, other spaces, too, but automotive is notable because of the level of innovation that we're seeing.

Okay. It looks like margins are about 15% in Q3. Could we get back to sort of the high 16s in the next couple of quarters, or is that a longer term target?

In advanced engineered materials?

Yes.

Oh, yeah, absolutely. I mean, this is a very high leveraged business, incremental revenue dollars at about 60% variable margin. If you push that down, you're somewhere in the 50% of every incremental revenue dollar gets dropped to the bottom line in EBITDA. So most definitely. This is a business that is performing very well now, but it's best days are in front of it and it continues to move towards those very rapidly.

All right, thank you.

Your next question from the line of Edlain Rodriguez from Gleacher & Company. Please proceed.

Thank you. Good morning, guys. Dave, quick question on strategy. I would assume like many shareholders you are probably frustrated with the low multiple that the company has. What do you think needs to happen to change that? Is it a question of most of the incremental growth has to be coming in the specialty businesses instead of the acetyl intermediates business to change a perception of Celanese as a commodity chemical company or do we need more acquisitions in AEM. I mean, give us a glimpse of like what the internal talks sound like.

It's a good question, you know, and ultimately, at end of the day, our job is to create shareholder value with all of the tools that we have. Our -- we're delighted with our business model. We're making some substantial progress as you have seen in moving towards a company that is higher margins, higher growth rates in earnings, you know, lower volatility in earnings and deployment of capital is very robust.

If we go back historically, we've met all of those marks over the last 10 years and we will continue to do it going forward. So our focus strategically, principally is in that area. Prudent use of cash through acquisitions and middle of the fairway bolt on acquisitions continues to be the path forward. A balanced use of cash, you know, you saw this quarter that we did some things to the balance sheet that we think were very healthy, very good, and very timely. Frankly, we got in the market at a perfect time to alleviate some of the concerns about the profile, debt profile, the maturity profile that we have.

So our view is that we'll continue doing the things that we can control going forward and we trust that as we execute the market will recognize the value that there is in the company. There's no CEO that is happy with the multiple of their company, and this is not the first one who will say we are happy with it, but we'll continue to execute as we have in the past. Mark?

Thanks, Dave. Edlain, as we think about it, we believe that there is a lot of valued creative opportunities across all of our business segments, whether it's in the technology focused, acetyl business, or some of the more speciality material business. So we'll look to deploy that cash really throughout all of the businesses with the primary objective, as Dave talked about, is moving towards higher growth rates, more sustained margins, less volatility, and return on invested capital far in excess of our weighted average cost of capital. And we see opportunities across all of them. So I wouldn't say that there's one business that's going to be more preferential, as long as we can continue to meet those overarching financial objectives.

Okay. Thank you.

The next line from the line of Kevin McCarthy from Bank of America Merrill Lynch. Please proceed.

Yes, good morning. Dave, I was wondering if you might compare and contrast the market for VAM relative to acetic acid right now. It seems earlier in the month there was a methanol inflection in China and I saw that you announced a few new price increases in acetic just yesterday in China. So maybe you can kind of walk us through that chain and comment on whether or not you feel there's an opportunity to expand margin either in acid or VAM?

Okay. Well, I'm going to have Doug talk about that because there is a little texture to what's going on in the market right now.

Kevin, this is Doug. You're right. As you take a look at it today, I characterize overall the market, and let's just broadly call it acetyls, whether it's acid or VAM, is stable and improving. You're seeing the price movements recently on the back of a couple of things. As I said earlier, one is that you're seeing an uptick in methanol where the marginal producers are out today pushing prices, probably $25, $30, $40 a ton and are higher right now out in the marketplace. That cascades all the way through the chain.

As you recall, too, with VAM, we have been out and over the last couple of quarters. We have been driving prices up post the Q1 escalation in our raw materials, you're seeing the affect of that, both in the region, but globally, and we've also said it takes time to see currency flow through, which we're seeing in the quarters as well. The third thing that I think is adding to what you may be mentioning regarding, specifically China, is that you also see near term some of that high cost VAM production that's pulling out of the market. And, frankly, with our leading position there in acid and VAM, we're benefiting by that, as well. We think that that's probably a near term through the quarter. We'll wait until we turn the page on the new year to see what it is, but the dynamics advantage us within the quarter and stay tuned and we'll see how this goes into the new year.

Let me summarize just kind of at a high level how I look at it.

Longer term, mid term to longer term, I think all of the major new plant capacities that were started prior to the market meltdown in 2008 are up and operating today. Since that time, there's been no fresh dirt turned on a new plant. Industry operating rates today, as Doug has said, are somewhere in the 80% range.

So going forward over the next several years, we would expect to see margin levels very similar to the third quarter. Occasionally, you may have unplanned outages within the competitive profile that would bring prices up somewhat. You know, we think, as we've highlighted before, we think between now and 2013, we're really, really confident with that picture of the world. You could get some tightening out towards the end of that, depending on global growth rates that could push prices up marginally on a sustainable basis out towards the end of that timeframe.

So that's how I characterize the world, and I think VAM follows a similar pattern as Doug said. We do expect margin recovery in VAM to continue and to hold, and a very healthy environment, frankly, for our acetyl business, very healthy.

That's helpful. On a separate subject, if I may, I think you announced some price increases in consumer specialties, up 7% to 10% I believe it was last month. Any thoughts on potential realizations there as you move into next year?

Yeah, Kevin, this is Doug again. You know, this is a business model that we do pricing more on an annualized basis in this space rather than some of our other businesses that look at it on a more frequent basis. And to some extent, it's got a balance of the value and use model along with some of the uptick that we see in raw materials.

Typically, we come into this time of year where we're out in those discussions. I'm not in a position today to share with you where we are, but I think if you look back over our history, you've seen strength in what we've been able to do. So, you know, at this point it's out there. We're in our discussions and those typically get closed sometime before the end of the year or occasionally lag a little bit into the first of the year.

Very good. Thank you.

Thanks, Kevin.

Your next question comes from the line of P.J. Juvekar from CITI. Please proceed.

Yes. Hi, good morning.

Hi P.J.

You know, China's drive to shut down all the polluting plants plus they had a big increase in electricity rates. Is that having an impact on this high cost ethanol and ethylene based acetic plants, and do you think there is a shake out coming among those high cost plants?

Yeah, P.J., it is happening, in fact -- excuse me -- it is having an affect upon those plants. Also there's some VAM plants that run through an acetylene route that's high pollution. So it's putting some pressure on that here about a year, year and a half ago, I think we publicly announced that we were working with one of those VAM producers with acetylene to provide some backup capacity. It certainly is a healthy environment. There is movement, very positive movement in China to do the right thing from an environmental standpoint.

Given the fact that we have a bookcase of environmentally friendly technologies and products, we think this is nothing but good for us. Certainly our acetyl technology is an advantage from an environmental standpoint. When we look at our emulsion businesses, it is very advantage from an environmental standpoint. And our Ticona, our Advanced Engineered Materials business, is very advantaged in helping auto manufacturers, as an example, increase fuel economy in their automobiles.

It is all a very positive movement and again, 40% of our business activity is in the Asia region, about 20% of it is in China. We continue to see China being a source of very good strong growth. 8% are to 10% per year growth in China is right in our sweet spot.

And second question is on acetyls again. Some of you paint customers, particularly in North America, are struggling with volumes. Are you seeing an impact on that on VAM? And with propylene and acrylics going up, are you seeing any share shift of VAM?

Yea, P.J., this is Doug again. Let me answer the first part of your question. Our business remains healthy globally whether we talk about North America or all three regions of the world, and both in our acetyl and then the downstream derivative businesses. Relative to specific questions on paints and coatings, you know, our demand is up across all three regions, as well.

We've got not only advantage technology, Dave spoke about some of the advantages that we've got, particularly with our low VOC products out there that we see in each region of the world, particularly in North America picking up greater momentum, as well. Regarding the cost advantages, we still remain on a cost value proposition. We remain advantage, we remain advantage based on not only the raw materials that you have sited cited out there, but advantage through the chain, as well. So I'd just way that our demand there remains healthy. We continue to achieve our market penetration objectives, and we think that continues.

You know, I'd just underscore that. In the area of innovation, I don't think we've seen more coating companies doing work with vinyl technology globally than we see today. It really feels to us that there is a rush towards acrylic technology, or vinyl technology, excuse me. And so though it's not reflected in our numbers today certainly very positive for the future.

Thank you.

Your next question comes from the line of Charles Neivert of Dahlman Rose. Please proceed.

Thanks. Back on that subject of innovation and new products, you sort of specifically referred to things in industrial specialties and AEM as sort of innovation and things that are coming online. Can you sort of characterize any of the new stuff that's come on in the last couple of years and how much of the revenue is that, and then looking out maybe a couple of years, you know, what kind of increases do you see in both those segments for new products or innovation.

This is Doug. Let me start this and I'll let me colleagues add to it. But you can almost -- you can kind of walk across any one of our portfolios and answer the question relative to innovation. We think about this in a couple of different ways. We think about this, not only in the process and our technology that enables the kind of advantages that we've built over the years say in our acetyl's complex where we've got the lowest cost, we've got capital efficiency and capability, but also on the product side.

If you look back to our AEM models, we've seen a very healthy, attractive non-automotive business that has been built over the years in medical and medical applications that continues to grow substantially and is a real growth platform for us. As we've said in the automotive, you know, we put more pounds on a vehicle and than other people and if you look annually, we put, you know, a couple of percent, 2% to 3% to 4% per year growth on the amount of value that we're putting on those vehicles. That comes as a result of working in our areas of innovation with our product offerings that we put out there with our key suppliers.

In our industrial specialties businesses, you know, we are in a segment today that is growing very rapidly with our EVA co-polymer businesses, that again, are in -- I'll call it the health and medical field for controlled dosages and controlled releases, which is selling remarkable acceptance in high levels growth. I could go on and on. Reality is, is that, as Dave spoke about before, you know, we think about innovation, growth, productivity across all of our businesses is essential. And whether we do it in our market interfacing businesses like AEM consumer specialties or industrial specialties or in acetyls with the leading process technology, we apply it universally; it's part of the business model.

And Charlie, going forward, you know, if you think of us doing roughly $1.1 billion this year and with the commitment in 2013 to do $1.6 billion, that $500 million EBITDA earnings growth, there will be roughly 20% of it come through innovation and new products that are already introduced in the market and this is just filling out market potential going forward. We do have innovation above and beyond that, as Doug has pointed out. In fact, I would stay tuned over the next several quarters to hear more about the innovation Celanese is bringing to help drive our company's performance.

Thank you.

Thank you.

Your next question comes from the line of Gregg Goodnight from Union Bank. Please proceed.

Good morning, gentlemen.

Hi, Gregg.

A couple of questions on the AEM side. I note your year-over-year growth revenues in operating EBITDA for AEM and I was curious as to what the contribution of your newly acquired businesses, your FACT, long fiber composites and the LCP is in terms of the relative amount of the year-over-year gain that was contributed by these two acquisitions?

Charlie, it was small in both revenue and EBITDA. You know, think in terms of low single digit contributions at this point. Having said that, we are very excited about multi acquisitions. We found more in both deals than we thought we'd see, particularly in the area of innovation.

Technologies that have been on the shelf without market access now have put in place with great market access because of our Ticona model and very good prospects going forward. In terms of this quarter, not an awful lot.

Great, that's helpful. Second thing, did I understand you correctly? You said when your Kelsterbach relocation is finished that you were going to have an uptick in capacity, did I hear 40% potential volume improvement?

Yeah.

Okay. Could you specify or break that down into what products? I assume POM is one of the big ones but any others?

No, it's POM. Kelsterbach today is principally a POM and then a compounding facility, and so the resin that is made at Kelsterbach is POM and POM is going to go into the (inaudible) site and we'll get about 40% more capacity out of that new unit.

Okay. And that's towards the end of 2011?

Yeah, yeah, we should be in startup in the facility second half of next year.

And any estimates on cost to complete that project versus what you have received from the various authorities?

We've not been public with anything but as you look at it, you would expect that just like any Celanese investment, it has a very attractive return on the incremental invested capital.

Okay. Thanks. Good quarter.

Thank you, Gregg.

Your next question comes from the line of Bill Young from (inaudible). Please proceed.

Good morning, gentlemen.

Hey, bill.

You mentioned, you know, the possibility of bolt on acquisitions. You know, what's out there? I don't mean anything specifics, exactly, but have you been looking strongly at a bunch of properties and are they available? Is it a price issue or where do we stand on that?

Bill, good question. Let me characterize not only the word today, but the world that we have seen over the last several quarters. We continue to be very active in the M&A field on discussions and face-to-face negotiations. These span multiple regions and multiple business lines. We've been successful in closing three transactions, the FACT transaction, DuPont, and then also the investment opportunity in the Middle East in the last 12 months, last nine months, basically. And so we continue to be both active and successful. I'd characterize the pipeline today as being good, but compared to nine months ago, it's not as frothy, not as robust. Most of the transactions that we pursue are businesses inside of companies. We tend to -- not tend, we're committed to being disciplined, fiscally disciplined. So there's been some things where we've walked away from, some things where the other side has changed their mind strategically. Bill, that kind of gives you the characterization.

Great. And just one follow-up, please. What is the likelihood, if any, of restructuring some of your joint ventures and affiliates to increase your ownership stake or incrementally increasing it? And second, you've had some pretty good achievements in going into low cost production areas like the Middle East. Do you see further opportunities in that direction?

We've been very open in saying that the affiliates are operationally significant for us and financially they provide a great contribution. They are very strategic within the way we think about our businesses. We have also been candid in saying that we would love to have larger ownership positions in each of them and we welcome the opportunity to pursue that. But on the other side of it, because they are so successful, the partner on the other side is reluctant in every case to move forward. We have been successful this year in restructuring one of the joint ventures, the Ibn Sina joint venture in the Middle East, to expand our business activity and provide increased ownership, increased earnings power for Celanese through that transaction. We continue to look for opportunities to do that, Bill, but I wouldn't pencil anything in.

Great. Thanks very much, Dave.

Thank you, Bill.

You have a follow-up question from the line of John McNulty from Credit Suisse. Please proceed.

This is Abi Rajindrin(ph) calling in for John McNulty. I had a quick question. One of your areas of focus in your innovation pipeline for industrial specialties it the construction market with regard to improving energy efficiency and sustainability. Could you just maybe talk a little bit about how recent trends in this space have affected the uptick of some of these new products?

Yeah. This is Doug. Clearly, if you go back and look over the last couple of years, you see the housing industry overall operating at a fraction of where it has been. Having said that, with the conversion of some of these systems that are used, whether it's for commercial, residential, renovations, the conversion in this case out of acrylics into our VAE-based systems has been positive. A lot of the growth, as well, that you're seeing is what we are speaking about when we talk about innovation; finding new applications for that kind of technology. And that's also going into applications; it's not only housing, but new other industrial applications, as well. So I think it all adds to the growth and the demand when you have a technology that gives the kind of advantages that we have been able to develop.

I would add a little bit to that. If you get into mature markets, Europe and North America, the transition to new technologies is slow. Now, having said that, our technologies in Europe, particularly northern Europe, are the dominant technologies because of the energy and the environmental impacts. It is interesting to note, however, in China that the growth we see in China is substantial. It is a new market. There is appeal for energy efficiency and for environmental. And, frankly, for lifestyle issues in China that's appealing for our products and we're getting some good growth there. We have a new plant that we're going to be starting up next year and it will support the demand growth that we see in China.

Okay, great. Thanks very much.

Thank you.

At this time we have no further questions. I would like to now turn the call back over to management for closing remarks.

Thanks, Katie. And thanks again, everyone for joining us on today's call. If you have any further questions or need any additional information, please don't hesitate to contact us. Thanks again.

Ladies and gentlemen, thank you very much for your participation in today's conference call. You may now disconnect. Have a wonderful day.