塞拉尼斯 (CE) 2011 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the second quarter 2011 Celanese Corp earnings conference call. My name is Tammy and I will be your conference moderator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to hand the presentation over to Mr. Mark Oberle, Senior Vice President Corporate Affairs.

Thank you and welcome everyone to the Celanese Corporation second quarter 2011 financial results conference call. My name is Mark Oberle, Senior Vice President of Corporate Affairs.

On the call today are Dave Weidman, Chairman and Chief Executive Officer, and Steven Sterin, Senior Vice President and Chief Financial Officer. I'd also like to introduce Jon Puckett, our new Vice President of Investor Relations. Jon joined Celanese with a distinguished track record of investor relations and finance experience most recently with ACS through the acquisition by Xerox. Welcome Jon.

The Celanese Corporation second quarter 2011 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 6 of the earnings release referenced during this call.

Celanese Corporation second quarter 2011 earnings release references the performance measures operating EBITDA, business operating EBITDA, affiliate EBITDA, proportional affiliate EBITDA, adjusted earnings-per-share and net debt and 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 posted on our website.

This morning Dave Weidman will review the performance of the strategy 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 would now like to turn the call over to Dave Weidman. Dave?

Mark, thanks. Welcome everyone to today's call.

I am extremely delighted to share highlights of Celanese record performance and report on progress in achieving our strategic growth objectives. I'll also provide more detail on our improved outlook for the remainder of 2011. I would like to begin with our record quarter.

Celanese net sales in the second quarter were $1.8 billion, operating EBITDA was $441 million and adjusted EPS was $1.66 per share. Both operating EBITDA and adjusted EPS were our best quarterly performances ever. Steven will provide additional commentary on each of the segments but overall, we saw continued robust demand across the Company reflecting good businesses, good execution of our strategy, and a global -- a very solid global economy. Our business in Asia continued to experience healthy growth through the Celanese strong technology position, new and innovative applications for our customers, and our exposure to a broad set of end market applications.

Based on our second quarter performance and expectations for continued global economic growth in the second half of the year, we are increasing our full-year 2011 outlook for adjusted earnings per share to be approximately $1.20 higher than last year's $3.37 per share. As you may recall, our previous outlook for adjusted EPS was $0.85 higher than last year's results and we now expect operating EBITDA to be approximately $275 million more than last year's results of $1.1 billion, an increase from our prior expectations of at least $200 million more than last year's results.

Celanese continue to make progress in meeting our short-term and long-term strategic objectives. At our investor day in May, we discussed our strategy for increasing shareholder value has two fundamental elements. First, top line growth, 100 basis points to 200 basis points faster than low global GDP, and second, converting our incremental revenue growth to earnings at a rate of at least 30%. These two features, strong top-line growth and high operating leverage, translate into a very attractive value proposition. Earnings increasing 10% to 15% per year, relatively higher margins, lower earnings volatility, and return on invested capital that significantly exceeded our weighted average cost of capital.

Now, beyond these core strategic elements, our new breakthrough TCX ethanol technology is another earnings growth upside for Celanese. With our novel breakthrough TCX technology we are able to produce cost-advantaged ethanol from raw material sources such as natural gas or coal.

Regarding TCX, I would like to highlight two recent accomplishments. First, in June we announced a more rapid entry into the ethanol market by modifying and enhancing our current Nanjing acetyl complex to produce at least 200,000 tons of industrial ethanol by 2013. By leveraging the existing infrastructure in Nanjing, we were able to accelerate our original plan by 6 months to 12 months, faster than originally expected. This should improve our overall profitability of the site with a more profitable product mix.

We also announced that we expect to commission our technology development unit in Clear Lake, Texas in mid-2012, again, earlier than previously expected. This unit will be dedicated to the ongoing development and advancement of our TCX technology. Beyond the Nanjing and Clear Lake units, in the mid-term we continue to plan for one and possibly two greenfield units in China, consistent with earlier announcements.

The second thing of significance in TCX relates to an announcement we made last night of two independent summaries from third-party reviewers validating our TCX technology. Since announcing our breakthrough in advanced ethanol technology last fall, we have been balancing the desire of our investors and other interested parties, for more information about TCX technology with our need to protect the inherent intellectual property. We understand the basic need for investors and others to validate the technology in order to gauge the level of risk the Company needs innovation, and have solicited input on how to satisfy this interest without compromising intellectual property and trade secrets. Several groups recommended the third party value of validation of the technology.

So in response, we fully disclosed the TCX technology to two highly respected independent engineering firms, Fluor and WorleyParsons under non-disclosure agreements. They have evaluated the technology and the scale up risks. Summaries of these independent third-party reviewers and an easy-to-use document with frequently-asked questions about TCX technology are now available to you on our TCX website which is www.celanesetcx.com. But let me take a few quotes from the validation statement and share with you.

The results of this review led Fluor to the professional opinion that the 400,000 tons plant and design will meet the capacity and conversion targets. Second, the flow -- the process flow of scheme is essentially conventional, with a combination of well-understood components that can be confidently scaled up to commercially -- to commercial plant capacity. And lastly, the assessment findings are very positive.

As you review these reports, we believe that you will understand why we are so enthusiastic about our TCX technology and the earnings power that it provides. We trust that these independent third party validations are helpful in your assessment and that they increase your level of confidence and enthusiasm for the value of our breakthrough proprietary technology. Looking forward, we will continue to provide you with more updates as they become available.

With that, I will now turn the call over to Steven and then rejoin you during Q&A. Steven.

Thanks Dave. Before I move into the segment results, let me make a few general comments.

Our business model continues to deliver excellent results and we continue to make significant progress towards our 2013 adjusted EPS target of greater than $6.00 a share. Financial performance in the quarter was strong across the portfolio. We continue to see healthy margins and sustained earnings growth with minimal volatility in our Industrial and Consumer Specialties businesses and in our AEM businesses.

This quarter's results in AI demonstrate the strength of our low-cost technology-leading franchise, and the periodic opportunity for shareholders to realize substantial value when margins move up in this business. AI is a truly unique business in the space, generating mid-teen EBITDA margins even when utilisation rates are around 80%, and high teens to low 20% margins from time to time as well.

Let's now review the second quarter performance, and our outlook for each business beginning with Advanced Engineered Materials on page 7 of the earnings presentation. This business continued to deliver strong earnings and margins as its innovation and application development efforts have continued to fuel growth. Net sales were $346 million, up $64 million from last year largely due to 9% higher pricing, primarily related to improved product mix and increased value-in-use pricing on sustained global demand. Net sales also benefited from the impact of our recent acquisition of the LCP PCT product lines from Dupont. We saw strong demand for our high engineered polymers during the quarter but Celanese POM volumes continued to be constrained as we built inventory from our planned European capacity expansion in order to support our customers' needs. This constraint will abate as we start up a new facility in the second half.

Operating EBITDA was $107 million, up $9 million from last year's results as the higher pricing more than offset fairly significant raw material cost increases and higher spending associated with our strategic growth initiatives. Earnings from Ticona's equity affiliates were flat year-over-year. We did see a modest impact to earnings in our Polyplastics venture in Japan resulting from the natural disasters in the region earlier this year. However, the strong performance in our other affiliates helped to mitigate this impact.

As we look ahead to the third quarter we expect a successful startup of our POM capacity expansion in Europe will result in higher year-over-year volumes. Demand for our high-value engineered polymers is expected to remain strong, driving sustained performance during the second half of the year. Earnings in the second half are normally lower than the first half due to seasonality. With the removal of the inventory constraints seen in the first half, we now expect second-half earnings to be significantly above 2010 second-half levels.

Let's now turn to Consumer Specialties on page 8. This business delivered sustained earnings and strong margins in the quarter, and benefited from our strong Chinese affiliate performance. Net sales were $291 million, flat year-over-year as higher pricing and favorable currency offset the lower volumes in the quarter. Compared to last year, volumes are down 6% year-over-year, but keep in mind that last year's second quarter volumes were unusually high, as they included volume recovery related to the production outage at our Narrows, Virginia facility that occurred during the first quarter of last year.

Operating EBITDA was $147 million, $2 million lower than last year's results due to the timing of these volume impacts, along with higher raw material and energy costs. Dividends from our acetate China ventures however totaled $78 million, $7 million higher than last year.

Our China ventures have grown significantly over the last several years as we continue to build on our long-standing position in this important region. Our previously announced flake and tow expansion at our China venture in Nantong remains on track for startup in the later part of this year -- next year. As we look ahead, although we expect higher energy costs will continue to be challenging in the second half of 2011, we also expect to see sustained demand and strong margins performance in this business.

Let's now move to Industrial Specialties on page 9. This business has made tremendous progress in its innovation and geographic expansion strategies resulting in improved performance and higher margins. Net sales rose to $329 million from last year's $269 million mainly driven by 12% higher pricing, more than offsetting higher raw material costs as global demand for our products continue to be strong. Improved volumes are a result of the innovative offerings for our emulsions business, particularly in North America and Europe as we displaced competing systems.

Demand for value-added product offerings on our EVA performance polymers business is also experiencing growth, particularly in Asia. Operating EBITDA increased to $40 million from last year's $26 million. Looking ahead, we expect margins and global demand will remain robust in the seasonally strong third quarter. Previously announced expansion and startup of our VAE unit in Nanjing should contribute to earnings performance beginning in Q3.

Acetyl Intermediates results are found on page 10. This business delivered expanding margins benefiting from the high utilization rates of the industry during the quarter, as the technology differentiated cost for acetic acid remains intact. Net sales were $914 million, $132 million higher than last year's results, primarily driven by significantly higher pricing as well as positive currency impact. Pricing was up 20% year-over-year due to the temporary spike in industry utilization from planned and unplanned industry outages among multiple acetyl producers. Rising raw material cost during the quarter were also factored in the increased pricing.

The lower volumes for Celanese year-over-year were due to our planned production turnarounds during the quarter but we continue to see strong demand in the industry for acetyl products. Operating EBITDA rose to $177 million from $96 million last year as the surging pricing and positive currency impacts more than offset higher raw material costs and lower volumes.

Looking ahead to the second half, we expect industry utilization rates to move towards more historic levels as the industry continues to resolve its production issues, and industry pricing and our operating EBITDA margins moderate back to mid-teen levels. The results of our strategic equity and cost investments are highlighted on page 11. The earnings impact of our affiliate performance shown on the left side of the chart. Year-to-date we reported $160 million of earnings from affiliates. More detailed results on our affiliate performance and proportional share can be found in table 8 of our earnings release.

We've highlighted our Q2 2011 cash flow results and outlook on pages 12 and 13 of the earnings presentation. I've got a couple of quick points to make here. First, we received a final cash payment from the Frankfurt airport authority of EUR110 million in the second quarter. Second, as you look forward to the second half you should expect approximately $10 million of incremental depreciation per quarter beginning in Q3, as the Kelsterbach relocation completes and the new unit comes online. Keep in mind you'll also see the impact of our refinancing in the second half of the year.

With that, I'll now turn the call over to Jon for Q&A and Q&A instructions.

Thanks Steven. Before we start the Q&A, I'd like to ask you to limit yourself to one question and one follow-up so we can get as many people through the queue as possible. If you have additional questions and time permits we will ask you to get back into the queue. Tanya, I will turn it over it you.

Thank you. (Operator Instructions) Bob Koort,, Goldman Sachs.

Appreciate the additional disclosures on ethanol. Just wondering if you could provide a little more color. Firstly, did -- it looked like the Fluor letter you posted was from a couple months back. I'm just curious why you waited a few months. Was that waiting for the other consultant to validate the technology?

And then secondly, what causes the toggle switch on whether you build one or two 4,000-ton plants in China?

To answer your first question you asked, we were -- they were staggered and when they started, and they were staggered when they deliver the results. The toggle switch, the decision-making on the second unit, one versus two, really depends on the market uptake of the first one.

Our strategic target is to go after growth in industrial ethanol and on that basis, the second unit has come up 2 to 3 years after the first one. You could have changes in the outlook of fermentation ethanol, corn-based ethanol, food product-based ethanol in China, where they would want to convert the arable land back into food rather than put it into some type of chemical production. And the demand in the market made it take the second plant quicker than the first plant.

PJ Juvekar, Citigroup.

Couple questions on your raw materials. You talk about what is happening to coal and syngas costs in China, how much are they up year-over-year?

Yes, I will let Steve fill you in on the details about it, but when we think about coal costs or syngas costs or frankly methanol costs, we look at it relative to the competition, because with the lowest cost manufacturing position, as raw materials go up or down, they are the same for us as they are for the competition and the margin over raw materials advantage that we have remains essentially unchanged. But Steve, with that, what are we seeing in the market on raws?

Year-over-year, similar to broad energy complex movements up, raw materials were significantly higher year-over-year. So we did see higher coal, methanol price etc., as Dave said. And as we've said before we've got natural hedges to our business as well as an advantage on the cost curve that allows us to mitigate those.

Through the first half of the year, not a lot of change if you look from Q1 to Q2 some sequential movement up, and some raw materials, but much more dramatic if you look at it year-over-year.

I appreciate that you are diversified in your raw materials globally. My second question is given the shale gas advantage in the US, do you have any plans to take advantage of that in your US efforts?

We continue to look at that PJ. There is a huge advantage, and because we are the C1 Company, the Company that has the most products, the most technology around natural gas, we look at that keenly. On the margin, I would say that we are making decisions for US production more favorable today than we were in the environment 3 or 4 years ago.

On a margin, it's much more economical to produce here and ship to other parts of the world such as Europe than it is in Asia right now. So on a margin we are making favorable decisions here and longer-term we continue to evaluate more projects and we will keep you posted as we make those decisions.

Kevin McCarthy, Bank of America Merrill Lynch.

Dave, what acetic acid price level are you incorporating into your financial guidance for the back half of the year? And maybe you can talk about the recent volatility in that market and what you're seeing here in the month of July.

Let me start on it and Steve can fill in the gaps. In the second quarter -- a little bit in the first quarter but mostly in the second quarter -- there was unplanned outages and planned outages across the industry. We were out with the planned outage, but you had several other manufacturers with both planned and unplanned outages.

We would say that the industry utilization rate increased by about 10%, or about 10% of the available capacity was offline. So, we think in a more normal world that industry utilization is somewhere in the low 80s.That probably pushed it up into the low 90s.

That does two things. One, it gives you some sense of the shape of the cost curve and the advantage that we have. Second, it gives you some idea going forward, there are still more outages in the marketplace, there still are folks that are struggling with getting their plants up and operating.

We see a gradual return to this margins that we would see at this low 80% level utilization over the second half of the year. We also have to take into account that we will have more capacity due to fewer plant outages then we have had in the first half. Steve?

You would expect to see a moderate decline as that capacity comes back online versus the step down. So think about it modestly declining through the second half of the year.

Keep in mind though that we have a planned outage in the second quarter, so we'll have some additional volumes as well as we move into the third quarter. So, on balance, you should continue to expect to see strong results in this business and, as we said, towards the back half of the year, starting to move back towards more normalized margins which are in the mid-teens.

Just to follow-up on that, if I look at your own segment volume number of minus 9%, presumably that was affected by your own outages. But perhaps you could comment on what the magnitude of that outage was, or said differently, what is your take on the underlying market rate of consumption for asset yields at this point?

We think that underlying rate, should everything be running at rates that we would think would be normalized, is 81% to 83%, someplace in there, it's in the low 80% range. And as we look at anticipating -- that's an unasked question -- if you look at the cost curve, we would jump up to the next level of pricing and margins, in the high 80% range, and then when you crossed 90%, you reach another threshold.

And if you take it out to 13, Kevin, at investor day we said that $1.7 billion plus of EBITDA in 2013 does not need acetic acid margins to be any higher than they would be on this normalized 82% range. And that there is a possibility in that 13 time frame that margins could be higher but we will count that as 1 of the 3 upsides to 2013 that we highlighted in investor day.

Margin expansion was one of them, the second one was an increased automotive production, particularly in North America and the third one was tied to housing. The US housing still is lagging but you saw our Industrial Specialties business had a great quarter and that was without any boost from housing all. There's at least those 3 upsides to 2013.

John McNulty, Credit Suisse.

Just a quick question on the 2013 outlook again. I don't believe that outlook made any assumptions for Nanjing being retrofit for the ethanol opportunity, and I'm wondering what the -- how should we should be thinking about the possible upside for that, especially given that it can switch from one product to the other. So can you put that in perspective for us?

We did say that we'd be north of $1.7 billion in our expectation for 2013 so this only reinforces that, so that was really the (inaudible). And we've also talked previously, John, about if you look at the current market for industrial ethanol, say single pricing in the $900 to $1,000 range per ton. We have said that we have margins north of 30% today in those businesses, so that gives you a sense -- a nice profitability [happening] plus as we talked, it will improve the overall mix of the site because we are going to have to modify the rest of the acetyl complex and you'll see product shift move around.

When we think about the profitability of that 200,000 tons, would it be -- is it fair to think of it as it's just half the profit of (inaudible) 400,000-ton facility? Are there puts and takes as to how to think about the incremental profitability on this slightly smaller plant with it being tied into the larger plant?

The technology is very scalable, allows us to get benefits pretty early in the scale-up and the sizing. So this is still a pretty large plant. It would be one of the largest plants in China, around 200,000. So you can think about it as having characteristics of margins I just talked about.

David Begleiter, Deutsche Bank.

David, just to go to Nanjing, just a thing about the incremental 200,000 tons. It is not incremental to the existing AA plant? It would be net of that plant in theory?

Right. That is the way to think about it. You've got an existing acetyl complex, and we have some constraints on raw materials but within those constraints, we will have the choice of optimizing the profitability by taking away from one of the products coming out of there and putting it into ethanol. At this point in time though, ethanol, we run it really fast and it would be pretty compelling versus some of the lower-profit products we have.

And does this supersede the AOPlus 2 expansion of another 300,000 tons to 1.5 million tons in Nanjing?

When you say supersede, no. We have the ability to do that, capability of doing that. It's something that when we looked at it, Dave, we -- globally we -- let me back up. We have technology that allows us to get more capacity out of our units today, all of our units. Strategically, our goal is to maintain the share of acetic acid somewhere in the 30% to 35% range and we will make incremental investments in order to do that, whether it be Nanjing or Clear Lake or Singapore, wherever it makes sense in the system.

As we put capacity in for ethanol, that's a new market and we will balance our systems to meet both strategic objectives -- pursue ethanol as well as maintain share in our acetyl business.

As we said before, because of our capital advantage, de-bottleneck versus a greenfield, you may make different decisions because you've got raw material advantages, or you can get better site agreements because of different dynamics in the market. So, we look at both the opportunity to do these de-bottlenecks as we move the AOPlus 2 or as we announced in investor day, we have AOPlus 3 technology that allows us to go to 1.8 million tons.

And a greenfield.

And a new greenfield facility.

Could you help frame the Kelsterbach opportunity as that plant ramps up?

Yes. We've got more capacity in this facility, Steve?

30% or 40% more capacity, which will give us another 3 to 4 years of growth in the POM business. So, it fuels growth and it will ramp up over time and take us to even beyond 2013 for our growth in that business. And we've also talked about putting in these latest technologies, which will reduce energy costs as well as our labor costs, so we expect to see an improvement there as well.

I think, Dave, just to scope it, this and a lot of the other things that we talked about at investor day, is consistent with the numbers we shared in 2013. This will be supportive of those numbers.

Frank Mitsch, Wells Fargo Securities.

A question on your increase in guidance, $75 million for the year versus what you thought 3 months ago. Obviously that's a function of some of the second-quarter upside as well as a better second half. Can you give us an indication in terms of which business segments are performing better than what your thoughts were just 3 months ago?

Versus 3 months ago, we first saw the movement because of the planned and unplanned outages in AI saw the benefit of that in the second quarter. On an EPS basis you are right, about $0.25 in the second quarter versus the first call number.

And as we look out in the second half, because it is going to take some time for the rest of the capacity to come on, we will see a moderate slope to the line as the rest of capacity comes online. So the additional $0.10 or the additional will come principally from AI and the rest of our businesses are performing well and as expected, and we're on a trajectory line that we would expect at this point and have expected and take us to the $1.7 billion in 2013.

So predominantly AI but the other businesses are performing well relative to what your expectations were?

Yes, we are delighted with the performance of all the businesses.

On the Consumer Specialties side. You did a good job of framing why the volumes are up year-over-year more related to 2010 versus anything in 2011, although your margins have dropped below or just equal to basically 20%. When do we get back to the 22% level in the margin side there?

That range that you talked about is the right range. Because the pricing in this business tends to be more annual, when you see a falling raw material environment or low-energy-cost environment, you tend to be at the upper end of that range.

And when you see a rising oil environment like we saw in the first half of this year, it tends to pressure a little bit towards the bottom, as you said our (inaudible) margins are high, so we are pleased with that. But that generally is what will drive you around that range.

Edlain Rodriguez, Gleacher & Co.

Quick question on AEM. It seems like lately prices have been much stronger or they've been swinging much more than in the past. Can you talk about what's going on there? Is it like a commodities side of the business or what else is going there that is pushing prices higher?

The way we do our cost accounting, you get mixed effects as well as price line. So, with the overall growth in the market, with the constrained capacity that we have today, there's a significant upgrading of the mix and that's reflected in our price line, and I would say that's a substantial part of what's going on.

Also, as you think about the world of products or materials that we compete with out there, whether they be metals or other plastics, it is a different value proposition today than it was a year, 18, 24 months ago, as those costs have gone up and so we priced on the value basis.

In some space that's not across the board but in some space there's been more opportunity to normalize to higher value level than it has been in the past.

Just to follow, how much of the portfolio in AEM would you say has that ability to raise prices or to see pricing movement like that?

The way we think about it is more on the basis of how we deal with our customers and their applications. A substantial part of our business, particularly the very high-value and used part of the business, is a very long-term relationship for the price discussion which seldom if ever has come up.

Now, obviously if the value equation changes, every new application you go into, you have a different discussion on that. And then there's some business in the middle where you may be able to have a price discussion once every 3 to 5 years.

And everyone is seeing what happens at prices in the commodity space over the last 12 or 18 months, 24 months, and I would not expect going forward you're going to see substantial movement in price. This is -- I think these two factors, the constrained capacity that improves the mix substantially combined with the macro economic dynamics of the products we compete with has created a unique situation that I don't think we would see. This is the first time in 11 years I've been involved with the pricing.

Hassan Ahmed, Alembic Global Advisors.

It seems that ethanol is on everyone's mind so another one on ethanol. I know you guys are initially targeting the industrial ethanol market, but it seems you haven't really ruled out the fuel blending side of things as well.

Now, if at all, eventually you were to tap into the market, and obviously with the facility is coming up in China in particular, as it stands today, obviously there is a fair bit of methanol being blended with fuel in China, and there seems to be a disconnect between at ethanol prices and methanol prices -- a disparity in China in particular.

So how should we think about the competitiveness of ethanol on the fuel side in China with regards to methanol?

Yes, let me start the answer out. There are several parts the question. Let me try to take one and have Steve deal with the rest of it. When we think about -- really doesn't matter what country it is, China or the US or India or Indonesia or Australia -- any country that has a dependence upon foreign oil for their transportation fuel, we haven't talked with one region that hasn't said we want to reduce our independence. We want to get out of the import energy game as much as we can.

So, most of these places are looking for multiple options and we've been convinced in the dialogue that rather than these different options being competitive, they are potentially complementary. They are different ways of reaching a national strategy of getting out of importing foreign oil.

And in no conversations we have been in has it been an either/or discussion; it's been thank goodness there's another arrow in our quiver as we combat this pernicious habit we have of taking oil from regions of the world that are inherently unstable. So that's the general dynamic, and Steve maybe you want to answer more some of these more specific questions.

As you said, when we first announced a technology, we announced that we were entering the commercial space on the industrial side and you've see the progress we've made there. We mentioned we are exploring the fuel market because it was new and novel technology to the marketplace.

At investor day I gave you an update that we've made substantial -- we've had substantial commercial discussions that were very well received with a number of customers. I'd say that those commercial discussions continue, and they continue to advance well.

We've also, as Dave said, there's a number of countries globally and we are building a pipeline of additional customers that have expressed interest that we're entering into commercial discussions with. So overall, as Dave said, that because of the dynamics, we've got a favorable reception for the technology.

In addition to it being another option, one thing I would point out on methanol is that if you look at methanol on a fully blended basis, the cost of methanol in gasoline, because it has very high revapor pressure, there are other additives that have to be blended into gasoline, even in China. And as a result, the blended cost of methanol in gasoline is a lot higher than just the absolute comparing ethanol to methanol.

From a customer perspective, our technology is significantly economically favorable to a methanol choice.

But having said that, as I look forward I think, let's take China as an example. They're going to be blending with methanol, they are going to be blending with MTBE, they are going to be blending with ethanol, there's -- my gosh, with the amount of demand growth that there is and their desire to get out of the import oil game, there's room for a lot of companies.

I think obviously the size of ethanol versus methanol is miniscule, right? You're talking about it good 25 million tons of methanol sitting there versus hardly anything on the ethanol side.

That's right. Fair enough, Yes, that's right.

Bill Young, ChemSpeak.

I realize that there were special events here in the second quarter that reduced your overall shipment level, but what was the volume trend or growth in the second quarter, and if you would, maybe you can give us your longer-term outlook for the key segments as to growth versus GDP volume growth?

For us, the underlying growth, remember we are very, very global. We've got 40% of what we do in the Asia region so our underlying growth was good. We saw the good, very solid economic environment, which continues to be a very solid global economic environment.

As we look at -- as we have highlighted at investor day, our advanced engineered materials, we think that would be growth going forward of 2 to 3 times GDP. As we go after new applications or have some new products or continue to penetrate different platforms such as automotive. In the advanced -- in the acetyl intermediate space, that growth there is 50 to 150 bits faster than global GDP. That's been a historical growth trend and will continue on that line.

The Consumer Specialties business, because of what we've got with acetate and those applications, that would probably be somewhat less than GDP, but again that's not really a GDP-driven business. It's a relatively stable growth business. Outside of China, your growth is probably in the 1% range; inside of China you're looking at a 3% to 5% growth.

Let's see, what did I miss here Steve? Industrial specialty. I'd say that's more of a GDP-type growth. With some of our new innovations and the advantages that we have with our biochemistry versus acrylate and [firing] acrylate, you may see growth there somewhat ahead of GDP.

Jay Harris, Goldsmith and Harris.

Got a balance sheet question. Trade receivables were up more than the revenues were up. What is going on there?

Our receivables, we tend to average somewhere between 50 and 55 days. It will vary throughout the year depending on seasonality, and in particular, this quarter we had a significant rise in sales in Asia where terms tend to be a little bit longer. I expect that to be a temporary movement, but most of the working capital increase is really driven by the overall increase in sales and the fact that it was increasing throughout the quarter.

Follow-up, on your technology, does that permit you to go to higher-chain alcohols at some point? Ethanol, butanol, et cetera.

Well, what we have discussed -- here's what we said. The TCX technology is for ethanol manufacture. We've always said that as we began the process that eventually came to TCX, our baseline was we have significant technology-based, very, very advantaged technology-base [from acetyl], so we launched efforts to determine what we could do with our acetyl-chemistry beyond our traditional products. And basically, ethanol was one of the first things that we came up with.

Bob Koort, Goldman Sachs.

This is actually Brian McGuire on for Bob. Just a couple of questions on the Kelsterbach relocation. Do you have an updated timeline on when you expect to have that fully behind you, and the capacity to be sustainable on rate?

We will be up and running in the second half with the majority of the facility and continue to ramp the rest of the capacity up over the next 12 months or so. I mentioned also earlier, we'll start to do depreciation, about 10 million a quarter, starting the second quarter.

So the inventory building that's been occurring the last couple quarters, will that still be a factor in the third quarter or will that be the third quarter or will that be mostly behind you now?

The constraint that we've had on volume availability will be behind us in the second half.

As you were building inventory, has there been a meaningful margin benefit from having made that product several quarters ago when raw materials prices were a little bit lower, and then being able to sell them now with higher prices because of higher current raw materials? Has that been meaningful or is that just a noise?

No, it's more noise. Plus we've spilt the inventory build and draw characteristics associated with the move, as was all the other costs, provided those to you so you could see that separately. On your specific question, not expecting anything significant.

Given all the headlines and macro news about slowdown and tightening in China, including PMI out last night and your large position in that country, I was hoping you could just comment on what you guys are seeing on the ground, and latest demand trends there.

We read the same things, but for Celanese we haven't seen it and frankly, we don't anticipate it.

Our business model is somewhat different than a GDP-driven business model. I mean a few elements of it, think about our acetate joint ventures, and the end-use there is really not a GDP-driven and uses very strong stable, significant earnings and cash generation. Think about our acetyl and acetic acid in particular, but we run plants full when 20%, 25% of the industry can't cover the variable economics.

At the end of the day, we can't, frankly, tell the difference between a single-digit and double-digit growth in that region or country. A lot of higher value-added applications in our Ticona business, a lot of translation going on, very low utilization in those millions of cars produced in China so a lot of translation going on in those cars. Short-term, mid-term, long-term, Asia is a tremendous place to grow and Celanese is well positioned for the growth.

Kevin McCarthy, Bank of America Merrill Lynch.

Thanks for taking my follow-up. It relates to your joint ventures, in particular POM resin. Just wondering, Dave, whether you see any opportunity to increase your ownership stake in polyplastics, I saw you announce the new 90 kiloton plant there in Malaysia. And I'm wondering if you see any opportunity in general, but also in connection with that expansion analogous to the model that you have. Have you been seeing where your stake will be rising with the expansion in 2013 there?

I will be -- our answer is really no different than it has been in the past as the ventures that we have are all strategic. They all are aligned with global businesses, polyplastics is in line with Ticona.

Though we don't have consolidation, we have substantial strategic benefits, and very active efforts to maximize that strategic alignment with each of our ventures. It is our interest, it is our desire to pursue arrangements where we could get more strategic value out of our ventures.

And even seeing that, as you pointed out, not only was it ownership but we were able to increase the benefit of our Company by this Ticona investment opportunity that we had in the Middle East, so we continue to look for those opportunities in all of our ventures. Our acetate ventures, for example, we continued to expand that over time and got a lot of value out of that. We'll just keep doing those things and periodically we may hear of some things coming.

This concludes our Q&A session at this time. I would now like to hand the conference back over to Mark Oberle for closing remarks.

Thank you, and thank you everyone for taking the time this morning. As we move forward I'll be working with Jon to transition so in the meantime, please feel free to call Jon or myself. The contact information is on the press release and we look forward to hearing from you soon. Thank you very much.

Thank you for attending today's conference. This concludes the presentation. You may now disconnect and have a great day.