塞拉尼斯 (CE) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 Celanese Corporation earnings conference call. My name is Laci, and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will facilitate a question-and-answer session towards the end of the presentation.

(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 call, Mr. Jon Puckett, Vice President of Investor Relations. Please proceed.

Thank you, Laci, and welcome to the Celanese Corporation fourth quarter 2011 financial results conference call. My name is Jon Puckett, Vice President Investor Relations. On the call today are Dave 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 of Corporate Affairs. The Celanese Corporation fourth 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. Both items were submitted to the SEC in a current report on Form 8-K. Please note we have made one update to slide 7 of the PowerPoint presentation to clarify the outlook for the Advanced Engineered Materials segment was for the first quarter of 2012.

During this call, management may make forward-looking statements concerning, for example, Celanese Corporation's future objectives and results which may be -- 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 in the earnings release referenced during this call. Celanese Corporation's fourth quarter 2011 earnings release references the performance measures operating EBITDA, business operating EBITDA, affiliate EBITDA, and proportional 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 and our financial statement and for a reconciliation of our non-US GAAP measures to US GAAP figures, please see the accompanying schedules to the fourth quarter earnings release posted on our website, Celanese.com. This morning, Dave Weidman will briefly review the performance of the Company, and Steve Sterin will provide an overview of the business results for each segment in the financials. We have a question-and-answer period following with Dave, Steven, and Doug. I would like to now turn the call over to Dave Weidman. Dave?

Jon, thanks, and welcome, everyone, to today's call. Because we released our preliminary 2011 results two weeks ago, I will keep my prepared remarks brief so that we can allow ample time for Doug and Steve to answer your questions. 2011 was a record earnings year for Celanese. Additionally, we hit several significant milestones critical to our commitment to grow earnings 10% to 15% per year. I would like to highlight a few of these achievements. First, we remain on track with our TCX ethanol technology commercialization plan. Not only are we meeting targets for our plants, but a few days ago, we saw legislation introduced to the US Congress that, if passed, would open up ethanol produced using TCX technology to the $40 billion US ethanol fuels marketing.

Second, innovative new products and applications are making a larger contribution. For example, our emulsion products can now be found in nontraditional applications in the paper and carpet market as well as paints sold at the leading big box retailers. Also, we're excited about the pipeline of new generation products from Ticona, Nutrinova, and our other businesses. Third, the recently completed capacity expansion in AEM and the acetyl chain provide us with the capacity needed to support growth. This is particularly critical as we anticipate the global markets will continue to experience steady growth.

Fourth, we completed the acquisition of two product lines that will support industrial specialties, strategic growth objectives. We continue to pursue an approach of strategic bolt-on acquisitions. Fifth, our results and productivity were continuous and sustainable. Across the Company, hundreds of projects focused on sustainable productivity, allowed us to meet or exceed our target of $40 million to $60 million of annual productivity net of inflation. And lastly, my announced intent to retire from Celanese in early April.

The Celanese Board chose Mark Rohr to become our next Chairman and CEO. I'm confident that under Mark's leadership, Celanese will continue to be successful in its strategic pursuit of becoming a premier chemical company. As this will be my last earnings call, I would like to publicly recognize the Celanese team who accepted the invitation to pursue Premier and whose contributions I've had the privilege of discussing with our shareholders for almost 12 years. I would also like to thank our investors, whose trust and confidence in us was exceeded only by their willingness to offer their perceptive business insights and share their thoughtful world views. With that, I will now turn the call over to Steven.

Thanks, Dave. Before we get into the results and outlook for each business, let me provide some color on how we're looking at 2012 and why we're confident in our ability to deliver on our earnings growth goal that exceed consensus that was $4.70 per share. With an assumed global GDP growth rate in the range of 3% to 3.5%, we have confidence that our businesses will deliver strong performance in 2012. Let me highlight some specific items to consider when thinking about full-year 2012 adjusted EPS. Let's start with Acetyl Intermediates. We expect full year 2012 operating EBITDA to be similar to 2011 results. In 2011, AI volumes were down about 4% due to turnarounds in the first half of the year and the rapid industry de-stocking at the end of the year.

In 2012, we expect to see volume growth and productivity that is sufficient to offset the temporary 2011 margin expansion as demand for acetic acid and downstream derivatives continues to grow at GDP plus 100 to 150 basis points. We have the capacity in place to rebound from the 2011 volume defines and supply this growth. And our long-term objective is to maintain a 30% to 35% share of the global production. In Advanced Engineered Materials, we normally expect to see growth of two to three times GDP over time with high translation to the bottom line. In 2012, we continue to expect this business to deliver strong earnings growth. However, top-line growth could be at the lower end of the two to three times global GDP average as we expect to see some softness in Europe.

We also expect strong contributions from our affiliates in the segment as they continue to grow similarly to our businesses. Additionally, keep in mind that in 2011, our Asian affiliates were affected by the tsunami in Japan and had a major turnaround in Q4. In consumer specialties, earnings are expected to continue to be stable and sustained from 2011 levels. 2013 is when you should see the earnings growth associated with our facility optimization and our China expansion. Industrial specialties is coming off a record profit year, and we project continued year-over-year growth from this business driven by our innovative programs and geographic growth. Lastly, outside of the businesses, there's some puts and takes that roughly offset each other, including favorable interest but also higher depreciation, primarily in AEM, due to the plant expansion start-up.

In terms of calendarization, in the past, we have seen seasonal earning patterns of 55% in the first half and 45% in the second half, primarily due to the second quarter dividend we received from our China acetate ventures. In 2012, we expect the shape of our earnings will be more balanced between the two halves as Acetyl Intermediates and Advanced Engineered Materials continue to improve as we move through the first half, following the de-stocking in Europe seen late in Q4. To summarize, we're confident in the growth potential of our businesses and our business model and in our ability to achieve our earnings growth goals for 2012. Now let me briefly review the fourth quarter performance and outlook for each of our businesses beginning with Advanced Engineered Materials on page 7 of the earnings slide presentation. This business delivered higher sales and earnings year-over-year in the quarter despite a weaker European economy. Net sales were $292 million in the quarter, up $18 million from last year. Higher pricing helped to offset the modest decline in volumes resulting from temporarily softer end market demand primarily in Europe. Operating EBITDA was $73 million, up $5 million from last year.

Looking ahead to the first quarter, sequentially, we expect to see stronger volumes due to seasonality, and the first quarter should also benefit following the Q4 turnaround of one of our Asian affiliates, which we previously communicated cost us $10 million to $15 million in Q4. Although we see stronger sequential volumes early in Q1, year-over-year volumes are likely to be lower due to softer demand in Europe. However, our continued progress in innovation and geographic growth should result in earnings relatively similar to prior year in the first quarter. Additionally on a year-over-year basis, first quarter D&A will be modestly higher due to the opening of our new pond unit in Germany. Think high single, low double digit increases.

Let's now turn to consumer specialties on page 8. We saw good volume growth in this business as demand continued to be strong for our consumer-driven applications. Net sales were $306 million, a $25 million increase from last year on higher pricing and volumes, but this could not offset significantly higher raw material and energy costs. Operating EBITDA was $73 million compared to $80 million a year ago. Looking forward to 2012, first quarter volumes and earnings will be impacted by an operational interruption at one of our production sites that we experienced in January, resulting in the delay of some shipments from Q1 to Q2. We expect earnings in the first half of 2012 to be similar to the same period last year. So this is just a first quarter/second quarter timing effect in the low to mid $20 million range.

Full-year earnings in 2012 are expected to remain stable, and we expect similar performance to 2011. Industrial specialties results are on page 9. The improved results this quarter reflect continued growth from our innovation efforts and geographic expansion. Net sales increased to $272 million, largely driven by 13% higher pricing. These results demonstrate our increased success and higher value non-traditional applications like the transition from styrene butadiene to our innovative vinyl technology in paper and carpet.

Operating EBITDA was $30 million, 11% higher than last year. As we look ahead, we expect first quarter volumes in earnings to increase both sequentially and year-over-year as higher demand for innovative products drive continued growth. Let's now turn to Acetyl Intermediates on page 10. As we discussed with you in our conference call a couple weeks ago, the weakened European economy resulted in lower end market demand late in the fourth quarter, which led to an acute inventory de-stocking in the Acetyl Intermediates industry supply chain and resulted in a temporary compression of margins. Net sales were $849 million, a $50 million increase year-over-year largely due to higher pricing and downstream derivatives that helped recover higher raw materials. This helped to offset modestly lower volumes in the quarter, but industry utilization rates declined significantly at the end of the quarter and compressed margins as companies liquidated inventory.

Operating EBITDA was $95 million, $32 million lower than last year. As we discussed previously, inventory effects resulting from the fourth quarter de-stocking, including FIFO and other inventory items, impacted our operating EBITDA results by approximately $15 million. We do not anticipate a similar inventory effect in the first quarter of 2012. Looking ahead, we have seen normal volume seasonality ahead of Chinese new year. But based upon feedback from our customers, we expect volume to begin to recover in the first quarter from the lower levels experienced in Q4. It normally takes a quarter or two for margins to recover in this industry, so we would expect sequential improvement in Q1 and then in Q2 as industry demand and utilization rates move back to more normalized levels. As a result of this, earnings in Q1 are expected to be slightly lower than prior year.

Strategic affiliates performance are highlighted on page 11. For the full year, we reported $192 million of earnings from our strategic affiliates, a 14% increase over the prior year. Keep in mind this number does not include $150 million of equity affiliate EBITDA that is not reflected in our reported results. You can refer to table 8 of our earnings release for further detail on our affiliate performance and our proportional share. On page 12, you will see our adjusted free cash flow was $326 million in 2011, or 11% higher than last year due to our record earnings performance this year.

We delivered these results even with capital expenditures and pension contributions that were higher than last year's levels. On page 13, we've included our 2012 outlook for adjusted free cash outflows. Our forecast for capital expenditures includes our previously announced accelerated industrial ethanol projects. Pension contributions in excess of the amount expensed is expected to be in the range of $100 million to $125 million. We expect to continue to generate strong cash flows that position us well to create value for our shareholders. With that, I will now turn the call over to Mark for some brief comments.

Thank you, Steven. I wanted to take just a minute to let everyone know that we're currently planning our investor day for 2012 for the fall of this year. It will be in Houston and focused on technology and innovation driven at Celanese. And we will provide more details as we get closer to that date. But I just wanted to let everyone know what we're currently thinking. With that, I will turn it over to Jon for Q and A.

Thank you.

(Operator Instructions)

David Begleiter, Deutsche Bank.

David, any update in terms of Chinese demand now post the new year and the trend on prices over the last couple weeks and perhaps going forward?

Let me ask Doug to answer that.

As Steven said in his comments, we're seeing order patterns typical of normal seasonality. Everything we see right now, I would say is on track with our thoughts and our view. You go into Chinese New Year, and typically it's a little softer until you come out of it. It leads probably about a week before the actual new year, and by the time units get started up, it usually lags a little bit. This year, Chinese New Year was early, so in spite of that, we're seeing the orders and the order patterns and the strengths of -- really solid and in line with what our normal seasonality would be.

David, I think that's clearly the case with acetyls, which have a little bit shorter lead time, but that's what we're seeing. We do have some businesses, particularly Advanced Engineered Materials, that have a bit longer lead time on their order books. As we look out 30, 45 days there, we're seeing sequential improvement across those businesses, so we're encouraged by what we're seeing in AEM and other businesses.

On acid pricing, China, the last couple weeks?

You've seen over the last couple weeks acid pricing starting to move up. I'm sure everybody looks at some of the published reports that are out there that has it a little north of $400. I would peg it somewhere in the $420 range today, which is probably about $10 to $20 higher than where you saw it towards the end of the year.

On ethanol and China, it's been awhile since the initial May announcement. What's the potential for an announcement on Greenfield site, a partnership with one of the producers over the next -- fuel marketers over the next few months here?

A lot of good progress has occurred. On a broad basis, you saw the announcement of the US legislation that was introduced. This is important in the journey. I don't think that the legislation is -- we're optimistic, but it will take a while for the legislation to get passed in the US. China, good progress going on there. I will let Steve talk about that.

As you look out to 2013, that's in the middle of the year is when we targeted our first full-scale industrial ethanol unit that started up, 200,000 tons. That remains on track. We're optimistic about the progress we're making there in the permitting process and the engineering construction process, so that remains on track. We're still in negotiations with a couple of parks in China in working those options for greenfield sites, so stay tuned on that. We'll update you as we progress, but we're still in negotiations.

And then, you asked about fuels. We continue, over the last 90 days, from our last update, I would say we've got a few more projects in the pipeline than we did then. The projects that we mentioned last time continue to move forward, so the momentum is positive. We've said that we may not announce anything until we get to more definitive agreements, given the length of the negotiation process, and the duration of the types of contracts that we're talking about under our tolling model. But in general, we've got more commercial activity taking place in fuels with more projects over the last 90 days.

Bob Koort, Goldman Sachs.

Congratulations, Dave. Good luck in your retirement.

Thanks, Bob.

Can you give us some sense regionally what's going on in AEM, if there's been any variation between trends in Europe, the US and what you're seeing in Asia?

You kind of look around the world. This year, we see still growth overall, some of that coming clearly in different regions of the world -- a lot of that coming out of the innovation efforts we've got going on in our own shop.

As you look at Europe, we expect a little softness in Europe coming out of the market. You look at things like the auto builds expected to be down, probably mid single digits year-over-year. But as you look at the US, we expect the US to be up by that or a little bit more, and then across Asia as well, demand there continues to be strong for auto builds.

You think about the electronics market. Last year, we saw a little bit softer demand. We would expect with the GDP growth and with some of the programs that we've got in the commercialization, we start to see some growth there. I would say Europe, flat to modestly down. US up for AEM, and Asia up as we continue to invest in the business there for growth.

If you translate that, we'd normally expect two to three times GDP growth in this business. You'd probably be a little bit more towards the lower end because of Europe, but when it comes to our control of our innovation efforts, and as Doug said the other regions, we're seeing nice, healthy demand. So still AEM will be a strong contributor to the growth, 2011 to 2012.

You've had over the years capacity additions. You've had some productivity gains. What would you gauge your normalized earnings power in that business to be on an operating EBITDA basis?

We've talked a little bit about that in the past. If you look at the end of 2010 and the first part of 2011 before the downturn, we were running in a 125 to 135 range. I think for where we are today, that's normal, what I would say as normal. Probably modestly below that in the first quarter, moving back towards that in the second quarter, and certainly we think we're going to grow through that normalized range as we move later in the year.

Keep in mind, this business grows at GDP plus 100 to 150. So when you take out the softness of Europe and you begin to recover and get normal global GDP growth on top of that, your new normal in the back half of the year should be a little bit north of that. So net-net, think of AI as being flat this year but a little softer in the first half just as we come out of the European softness.

Frank Mitsch, Wells Fargo Securities.

Good morning, gentlemen, and Dave, congratulations on a great career at Celanese and best wishes for your future plans.

Thanks, Frank.

Yes, sticking with AI, can you talk about the expectations for industry operating rates? Where do you believe they were in the fourth quarter, and what's your sense as we progress through 2012 how the industry operating rates will be trending?

If you look at fourth quarter, we would peg those rates probably in the, on average, mid 70% range, higher at the beginning of the quarter. And as we've indicated, it came off fairly quickly. That means that some folks cut back substantially as they went into it. Some reported the high end of the curve, probably down in the 50% to 60% range.

As you know, we run our units, and we continue to run our units, but I would say that as we now look at -- we turn the page on the calendar year and look at the quarter and frankly the year, we'd probably have those in the low 80% type range for utilization.

So low 80% is what your expectation is for all of 2012?

Yes, and as industry and demand kind of comes back with this global GDP, you kind of climb through there, but I would peg it in the low to mid 80% range.

Your expectation is that you would be in the mid-90%s plus?

With the GDP growth, that's the industry. We run our rates full, as you well know, so I think that's a reasonable assessment.

If I could just ask a question on the consumer specialties, you talked about this operational interruption that will impact you in the mid -- low- to mid-$20 million range during the first quarter. Can you give a little more clarity on that? Has that started? When do you anticipate that being finished, and where specifically is that facility?

Frank, it's done and it's finished. It really is just the timing of some sales. The disruption was really tied to some third-party services. We've addressed it. The units are up, they're operating. So it really is just the timing of sales. Net-net to the year, no change, no blood, just timing from Q1 to Q2.

John McNulty, Credit Suisse.

Good morning. And again, Dave, congratulations.

Thanks, John.

With regard to uses for cash, I know you've been looking for bolt-on acquisitions. You had a couple in the fourth quarter. Can you give us an update as to how we should be thinking about the pipeline and your uses of cash towards that pipeline in 2012?

You mentioned a couple in the fourth quarter. One of them closed in the first quarter this year, the DuPont acquisition -- I'm sorry, the Ashland acquisition that we completed in the AEM business. So that will roll into the first quarter. Those are the type of acquisitions that we call the center of the fairway looking at technologies, product lines, parts of businesses, as we've talked in the past. So not a meaningful change in our strategy in terms of M&A.

We're still holding to a very strict financial discipline around 4x to 6x post-synergy multiple. Other uses of cash really unchanged, continuing to fund the pension plan as we've mentioned, then balance beyond that between probably the next largest use of cash is debt repayment over time, continue to reinvest in the business and the projects that we've talked about like industrial ethanol, and also share repurchases. We'd move our dividend up over the last couple years so you can expect directionally similar types of capital structure actions.

One last follow-up on the FIFO benefit that you got. With pricing starting to move higher, should we be thinking about -- or excuse me, the FIFO hit that you took -- should we be thinking about a potential FIFO benefit in the first quarter, or is that something where the prices haven't moved enough to really move the needle?

Think about that as a cost that impacted us in the fourth quarter. We only really -- it was included in our numbers so we really just called it out to bring your attention to it, and the key issue, it's not something that will reverse, but it's something that won't recur. We provided that so you can get a sense of what the fourth quarter were to look like absent that amount. As we move into the first quarter, you shouldn't see those types of charges again.

Duffy Fisher, Barclays Capital.

I wonder if you could just give a little more color -- you had given some EPS guidance for this year. How much of that will happen, or that year-over-year change, at the EBITDA level versus below the EBITDA level?

And then if you could, you've also given a 2013 number of greater than $6. Can you walk through the big buckets as you look out to '13, where you think that growth will come from, whether it's new plants coming on-line, some acquisitions, price, volume?

This year you'll see a little bit more EBITDA growth in EPS because we do have some additional depreciation. We also have some favorable interest. Taxes should be in a similar range. So I would say it's fairly balanced. Maybe a little bit more on EBITDA because of depreciation not being in that line.

As you move to 2013, as we have said, to achieve our objectives of north of $6 a share, a lot of it is Celanese-controllable activities. I would say the first category is being positioned for growth to move our innovation pipeline forward. Whether it's the expansion of our POM facility in Germany, our emulsions expansions in Asia, our expansions in our EVA business and our industrial ethanol facility in China, those are all levers that will provide us growth as we move forward.

So think about growth driven by -- some from GDP but principally through our innovation efforts. And we've got the capacity in place to grow. The second area is, I failed to mention, sorry, one other growth area, which is the expansion of our Chinese joint ventures that we'll begin to see the benefit of in 2013 and our acetate business.

In the second area, our consumer specialties business, we'll see the benefits and the shut-down of the Spondon facility, which is about $30 million to $40 million in 2013, so that remains on track and is a strong contributor to earnings growth between '12 and '13. If I were to step back and summarize it business-by-business, I would say in the Acetyl Intermediates business, think about GDP plus 100 to 150 basis points of growth -- we're positioned for it. Cost curve remains intact. At our investor day last year we talked about some nice productivity coming out of that business that will even strengthen ourselves on the cost curve.

In our AEM business, two to three times GDP with high conversion. We have said we'll be at the lower end that. We'd expect to be more in the normal range next year as Europe begins to recover.

Consumer specialties, I mentioned Spondon shut down and the acetate expansion will drive the growth there. We've got some exciting innovation in our Nutrinova business as well, so you should see earnings growth in that business. We've announced some price increases in that business.

When you think about our industrial specialties business, we're -- actually, we're doing our innovation programs, we're ahead of schedule. We thought we would be around $200 million plus in 2013. We did $150 million in 2011.

Industrial specialties is becoming a bigger, more important part of the strategy and demonstrating our true innovation programs. I would say the other key element is the industrial ethanol start-up planned for the middle of 2013 in China. Keep in mind that that's actually a retrofit into our existing facility. We'll be taking raw materials out of the acetyl product chain and moving them into the industrial ethanol business. So you will see some earnings growth come from that as well.

One more quick note. We've mentioned this before, but there are some upsides to 2013 that are not included in our numbers, and that would be a recovery in housing in the US or Europe, but most likely the US, as well as recovery in automotive in the west, so we're excited about 2013, and we're also generating significant cash flows. So you've got to take that into account as you look at EPS growth. We will have very strong cash generation over the next two years.

One on the ethanol. With the change, what seems like structural in the US on gas prices, how do you think about the value of ethanol geographically? If you put it in three buckets, China, US, and all other, how would you think about the value of your ethanol business?

I'll break into it industrial and fuel. Industrial will be the low-cost producer. Think of it similar to our advantage in acetyl. We have a leading cost position for our customers, and in the industrial market. That's why we think we can capture a significant portion of the growth in China.

In the fuels market in the eastern -- I will say broadly eastern hemisphere, sub-Asia, China specifically, where you don't have arable land, you don't have biomass, you don't have alternatives. You're really competing against oil prices which have shown a resiliency to stay high versus our low-cost coal to liquid or gas to liquid technology.

We think the value proposition is very strong in Asia and the Middle East. In the Americas, in Brazil and the US, the largest market, it's a tremendous opportunity, but you have a lot of capacity that's there today. We still think we'll be competitive. Certainly versus some of these new low-energy density technologies, whether it's waste or biomass, so we feel that we'll also be the low-cost producer in this region of the world as well.

Kevin McCarthy, Bank of America Merrill Lynch.

Dave, is it becoming more difficult, in your judgment, to obtain greenfield capacity expansion permits in China? Some of your peers across the industry have expressed that concern, albeit in other product lines where Celanese does not compete. As someone that's very close to the market there, I'd be interested to hear your perspective and whether or not it alters in any way expected time lines for your greenfield ethanol plants in China.

Let me answer the last question first. The time lines aren't altered, but it is a different permitting environment today than it was seven years ago when we went through permitting for the Nanjing complex, the Nanjing facility. China has matured an awful lot in their permitting process. The things they ask for are more contemporary with what we would see in Houston or what we would see in Germany, the Western world.

For Celanese, though, we brought that seven years ago. It wasn't required, but we brought it anyway. In the world we're in today, we're bringing it. The reviews are very similar the dialogues are very similar. It's different today than it was seven years ago, but it's not different from what you would see in other environments.

Companies bring the advanced technologies and the technologies that are efficient users of energy and raw materials, and which we feel both our acetyl technology as well as our new industrial ethanol and fuel ethanol technologies meet those standards.

Is it fair to say that your confidence level remains quite high that you will be permitted at either Nanjing or Zhuhai for greenfield?

Yes.

A follow-up, if I may, for Steve on slide 13. On your cash flow table there, you have a category called Reserve/Other indicated at $190 million to $200 million. It looks to be a much larger number than you indicated last quarter for 2011, maybe up $100 million, $110 million. I was wondering if you could elaborate on what is in that bucket and what is driving the increase, please.

The main driver there is that we push -- if you recall, we pushed the shutdown of Spondon out a year so you're seeing most of the cash outflow related to the shutdown of that facility taking place in this full calendar year instead of being spread out over a couple of years. We relied on it in actuals in 2011. So really just a timing issue.

Timing issue. And you would you expect that then to drop back down in '13. Is that fair?

That's higher than our normal run rate, which I would say is more probably in the, as you said, 100 to 120 level.

Andy Cash with UBS.

You have talked about Celanese growth relative to GDP a number of times, so I'm just looking at that. If you go back to 2006, global GDP has increased for the past five years and your overall growth has declined four of the five. If you look cumulatively, your volume would be down about 5% or 6%, and GDP would be up about 14%.

If you look at this volume decline, was it market share loss, was it markets declining, was it intentionally passing on some business? If you could capture what the overall reason from a high level would be.

If you look over the time frame, one of the things, and it's all public information. We can help you with this. There's been some divestitures that we've done that didn't get disc-op treatment, so that's affecting it when you look at our volume lines.

But if you look across the Advanced Engineered Materials business, you can certainly see the growth there. That business was, back in that time frame, around $700 million. We're about $1.2 billion this year.

Acetyl Intermediates, we've continued to run full, and we've stated over time we're going to grow with the market. Industrial specialties, you can see the top-line growth there. So I think you're probably seeing some of the noise from some of the divestitures. We can help with you that.

But my understanding, when you report your volume, that was on an ongoing basis, so I beg your pardon if I was not including that divestiture.

No, some of the divestitures didn't get that disc-op treatment where you would normally strip it out.

There's one other structural thing you have to take into consideration, particularly in our acetate business where we have shifted production from what we would count as revenue in the US or Europe and have shifted that to match the market growth in China. So you see the offset significantly higher dividends coming into our acetate business, but you are going to see less on a revenue basis. And that's just part of our ongoing strategy for that business line.

One other question. Over on the TCX, given the CO2 issues surrounding use of petroleum feedstocks, why do you have confidence that you will -- there's a chance of getting this through Congress?

As we look at -- when you look at the CO2 footprint of various hydrocarbon-based technologies, we think that we're better than nearly all other options for the use of natural gas in the United States. On a relative basis, it's a very low CO2 option for the use of gas.

The same holds true in China. If you look at competing technologies using coal, either for coal to liquids or coal to energy, we've got an advantaged footprint versus those other technologies as well. We think bio has a role, too. We've always thought that that's an important part of having all of the above approach to solving our energy issues. That's how we view it.

Lawrence Alexander, Jefferies.

Two questions around visibility. I was wondering to what extent you can quantify some items. For AEM, it looks as if even after backing out the one-time adjustment, you're looking for profits to double roughly double sequentially. I was wondering if you could flesh that out.

Then as think about the bridge into 2013, you listed about six different factors. Can you just walk through which ones you think are under your control? By my math, it looks as if you have $70 million to $100 million of year-over-year tail wind that's directly under your control and not contingent on market factors. Is that roughly fair?

Yes, I will start with the first part of the question and walk you from Q4 to Q 1, then Doug can explain to you why that business grows at two to three times GDP. Keep in mind that in the fourth quarter it's the slowest quarter of the year because of seasonality, customer shutdowns, and the seasonality of the end markets. The first quarter tends to be one of the stronger quarters, Q1 and Q2, so you certainly have more volume coming through.

You can see that historically as you look across that business. Also in the fourth quarter we had about $10 million to $15 million of charges come through in our equity affiliates, because they had a major turnaround. So you'll see -- you won't see those charges again as you move from Q4 to Q1, and our affiliates have a lot of similar customers and applications, so you should see the growth rate that we talked about in our business show up also in the affiliate. So we feel good about that type of Q4 to Q1, a walk that you just did. Doug, you want to cover the second question?

With our AEM business, we've got leading position in the industries that we serve. If you take a look at the business model that we've got, we are set to drive through to our innovation programs, being able to put, for instance, more parts, more weight, more value on vehicles, to be able to bring innovation to the world of electronics, which frankly has got some fairly high growth rates. As you take a look across the portfolio with our engineering and with some of the solutions that we bring to these small, high value parts, we're able to grow substantially greater than GDP.

Remember that also we've been -- we've been investing heavily in Asia, and the growth rates in Asia are certainly elevated. I'm not speaking now just China specifically, but as you look across the globe, we've got great presence in each of the regions and certainly in the highest growth regions.

We've got a great portfolio of products that goes broadly across large application areas, and all of those are in high growth areas, and we've got a business model that allows us to build close relationships with engineers in the value and use model that drives the two to three times GDP growth.

So at a high level, if you were to walk from 2012 to 2013, think about the two to three times GDP that Doug said. We have some visibility, because we've got a pipeline, we're working on model years that go out that period of time.

We've got the penetration and the application, and if you think about a business that generating 1.3 plus top line, if you think about a 3 to 3.5 GDP, you get pretty strong top-line growth. The translation is also very high.

These are high variable margin businesses, product lines, because they bring a lot of value to the customer, and they are replacing more expensive components where they enhance the cost position of our customer. So you get somewhere between 30% to 45% translation to the bottom line. And then you also -- so that right there, if you do the math on it, gets you in the $40 million to $50 million a year of growth.

Then you see another $10 million or $15 million coming through your affiliates because of the same types of drivers. They've also got advanced technologies in POM, and we've got an expansion taking place in one of those businesses -- in one of those affiliates in Malaysia to serve the fast growing Asia market. So we feel really good about the continued growth in this business.

Hassan Ahmed, Alembic Global.

Question around the cash flows, particularly in 2011. As I look at the operating cash number, it's around $638 million. Of that, it seems around $285 million is coming from the affiliates. If we net away the affiliates, it seems that the core business is generating around $350 million, or it generated around $350 million in 2011, which essentially is in line with the CapEx for that given year. Going forward, how should we think about the non-affiliate business cash generation ability, in excess of the CapEx needs?

You highlighted a couple of key points. I'll make two points about the affiliates. One is, as we talked before, we don't get a full recognition of their earnings in our EBITDA. Table 8 of our press release shows you that we had about $150 million of earnings not included. I think that's an important point as you look at the overall affiliates' impact on the value of the company.

The second key point is that these affiliates pay cash. They're not just P & L benefit. They are actually generating cash. Then I would differentiate the affiliates into two categories. Because our Ibn Sina affiliate, it's going to be a platform for POM growth long term, as we're going to build a facility there. But think of it today, it's got -- a lot of is it a hedge to raw materials, so really it's an offset to what's happening in the business. I would consider that more part of normal operating cash flows coming out.

When you look at Celanese' cash position today, when you look at 2012, keep in mind what I mentioned earlier. You've got higher reserve spending because of our Spondon shut-down, but that's got a very high cash pay back. The other key thing is we are funding our pension plan. To the extent you consider that a form of de-leveraging, that's in the $150 million range. So that's a key part of operating capital.

When you look at those components, that helps to provide a little bit more granularity into what's driving cash flows. We're able to fund the continued expansion of really the portfolio globally as we've talked today about the projects that are out there, fund the pension plan, have a natural hedge in our Ibn Sina venture, have a nice global position that complements our AEM business with our plastics affiliates, and still generates significant capital beyond that. We paid down $300 million in debt over the last 18 months.

P.J. Juvekar, Citi.

You mentioned a shift from [SBnatics] to acetyls in paper and carpet markets. Is that big on that cheaper pricing or performance, and how big is this opportunity for you? Can you go into that?

P.J., you've clearly seen a shift on the SB versus the vinyls, but I wouldn't want to understate the performance features that our vinyls technology brings as well. Without taking you through the whole thing, it's largely on performance. There's a significant shift underway on the pricing. So when you look at the value and use of pricing model that we bring to those two end uses, significant increase in the portfolio, as Steven has said.

It's a big market. Styrene butadiene itself is a huge market. We see this as structural. We see this as long term. We've moved forward in advance of our innovation targets there. I can tell that you with the agreements and the commercialization plans that we put in place in '11 and '12, it's a sizable part of going forward, what we think of as that business.

The second question on your ethanol plant in China, I think it was Sopo that also announced the new ethanol plant from Singas in China for 2013. Do you have any intelligence on that and do you think they have viable technology to compete with you?

Sopo has been public about their intent. There's a number of others -- there's a lot of technology taking place, technology development in early stages taking place. When we did our investor day, we were already aware of that, so that's a little bit of old news. They had been out talking about this technology and working on it for quite awhile. We still think that we've got the lowest cost and most scalable, which is very important in the fuels industry, technology. On order of magnitude, five to ten times larger than anybody has announced even entitlement size or scale.

We're not surprised by it. We're aware of it. We realize this is a big playing field, the fuels industry. There's a lot of players trying to figure out ways into the space through different routes. But we think that our route, because it leverages our advantage in Acetyl Intermediates and what we've done there over the last 35 years positions us as the leader in the ethanol industry going forward.

The only thing I will add to that -- I think that announcement is dated, but I think it's a demonstration unit. I think it's a small demonstration unit. Certainly not a commercial unit.

So on a commercial scale, you're saying that your plants are five to ten times larger than the competition? Is that what you said?

Yes, if you look at what people have said that they can do, nobody has demonstrated it yet, but if you just take it on face value, we offer a scale advantage at lower capital, which typically I wouldn't point out, because at the end of the day that's ROI, but we've got that advantage. When you look at the fuels industry, because of the size of refineries, our million ton facilities match up really well for the fuels industry.

Mike [Risenzeller], Piper Jaffray.

Good morning, guys. My question is on the CapEx for TCX. On slide 13, you highlight the $350 million to $400 million in 2012. Can you give us a sense for the portion that's allocated to the project that's starting up in 2013 and maybe frame our expectations around the staging of that project? Is it a 12-month construction time line?

And then a follow-up on that would be on a greenfield plant versus the retrofit and what the synergies you see in the retrofit that you won't have on the greenfield, in terms of CapEx and timing.

We have not commented specifically on what the CapEx is for this retrofit unit, because it is -- I will give you a basis to go off of. We've said that our investment in a greenfield is $300 million for a 400,000-ton unit off the grain field, and less than double that for a million ton unit. You could imagine that it would be less than $300 million. And typically, these are 24- to 36-month type of projects when they're greenfield, so it's a little bit shorter time frame when it's a retrofit.

Nils Wallin, CLSA.

Question on the challenges of fuel ethanol in China. There's been some discussion about China improving standards for M-15, and about seven different provinces already have some sort of methanol blending in the gasoline stream. Curious what you see as the challenge for fuel ethanol to compete with methanol if the standards are finally approved, and -- or what do you see in terms of the ability to prove out that strategy over methanol.

You know, this is public, so you can go back and look at it, but Sinopec has talked about -- so there's really two leaders that make up the majority of the Chinese gasoline distribution market, Petrochina and Synerfac. Synerfac has been public in stating that they are not going to put methanol into their gasoline because there is risk of toxicity. It's a highly toxic additive.

There are provinces that have methanol units that are underutilized. Methanol can be put in gasoline. On a molecular basis per ton it is cheaper, but higher rebate for pressure and other challenges associated with it. As we look at China as a whole, we view that on the outside, but one of the solutions in some of the provinces could be methanol, but we think based on comments by the government, comments by the leaders in the industry that ethanol has a substantial role to play in China.

Ladies and gentlemen, this concludes our question-and-answer portion of today's call. I will now turn the call back over to Mr. Jon Puckett, vice president of Investor Relations, for closing remarks.

Thank you, Laci. We will be around for questions later. We appreciate your interest in Celanese and the time you spent with us today, and I will be around all day and the rest of the week to take questions.

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