塞拉尼斯 (CE) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2012 Celanese earnings conference call. My name is Derek. I will be your operator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session at the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Jon Puckett, Vice President of Investor Relations. Please proceed.

Thank you, Derek. Welcome to the Celanese Corporation first quarter 2012 financial results conference call. My name is Jon Puckett, Vice President, Investor Relations. On the call today are Mark Rohr, Chairman and Chief Executive Officer; 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 first quarter 2012 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.

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 in the earnings release referenced during this call. Celanese Corporation's first quarter 2012 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 statements and for a reconciliation of our non-US GAAP measures to US GAAP figures, please see the accompanying schedules to the first quarter earnings release posted on our website, Celanese.com.

This morning, Mark Rohr will briefly review the performance of the Company and Steven Sterin will provide an overview of the business results for each segments and the financials. We will have a question-and-answer period with Mark, Steven and Doug following the prepared remarks. I'd like now to turn the call over to Mark Rohr. Mark?

Thanks, Jon. Welcome, everyone, to today's call. It's a pleasure to be here and I'm honored to be joining as the CEO of Celanese and we all look forward to your questions after our remarks. Before I get into a few details on this quarter, I'd like to highlight some recent accomplishments that we are particularly excited about.

In March we received key government approvals to produce ethanol for industrial use at our Nanjing facility. This is a significant milestone as we move the coal-based ethanol opportunity closer to reality. Additionally, continued advancements in TCX catalyst technology have allowed us to expand the capacity of this plant by 30% to 40% without capital addition getting us to about 275,000 tons. We have begun construction and anticipate this unit will be operational in the middle of 2013.

Also want to mention the completion of the acquisition of several product lines from Ashland's for our emulsions business. I'm very impressed with the new product improvements we've made in this segment and this acquisition helps us to continue to advance the value of this business.

As we end the quarter, Moody's investors services and Standard & Poor's rating services both raised our outlook to positive. Balancing growth objectives with debt reduction and cash distribution in a way that moves us to investment grade is important to me and the Celanese leadership team.

For the quarter I'm pleased to report net sales of $1.63 billion, an increase of 3% over the prior year period and 1% over the fourth quarter. Diluted EPS from continuing operations came in at $1.15 per share. That's an increase of $0.28 per share or approximately 32% over 2011 and it's an increase of $0.54 per share and approximately 89% over the fourth quarter. Adjusted earnings per share, which excludes these tax credits and other charges and adjustments was $0.72 per share, these earnings are down $0.24 per share from the first quarter of 2011 and up $0.14 per share, or 24%, sequentially. Our year-over-year earnings were impacted by weakness in the acetyl chain that is a reflection of soft demand in China and Europe which ultimately lead to over supply in Asia outside of China. Demand prices and margin were all impacted as a result. We saw similar softness in some Advanced Engineered Materials market segments driven by weak automobile builds in Europe, which is classically a very strong segment for Celanese.

Weakness in the industrial and electronics sectors also were seeing that we're beyond our expectations. In addition to these economic impacts that I've mentioned, we continue to see strong raw material inflation trends. They keep pushing the need to drop product pricing. In 2011 we saw raw material costs increase $280 million year-over-year and we expect raw materials to rise another $100 million to $110 million this year. Some of this inflation pinched our margins this quarter, and while I believe we are taking steps to overcome these costs, it nonetheless represents a challenge for us.

In spite of these near-term challenges, we are working hard to deliver on our earnings commitment for the year. To be honest, we've seen some favorable trends. But to help overcome the slow start, we have focused on items we can't control, so let me give you a few examples. First, we are concentrating our customer-facing efforts to make certain we are taking advantage of every opportunity to draw profit and growth. We have done a good job of this historically, but I'm challenging our leadership team to get even closer to our end markets so we can better anticipate their needs and meet them. Second, we need to run our plants to draw profitability and if our margins are below a level that makes sense, we will take actions needed to improve our financial performance. We have found ourselves in this situation in the first quarter and have idled our 600,000 ton Singapore facility as a result. And, third, we have historically focused on productivity and cost initiatives across the Company to maximize value. We now have an increased focus on variable cost and process technology improvements and I believe we can further enhance our performance this year and create value for our stakeholders that will offset some of the market volatility. By focusing our team on things they can't control, my goal is not only to continue to generate great results but to accelerate the trajectory of earnings growth and shareholder returns as we go forward. With that, I will turn the call over to Steve Sterin.

Great. Thanks, Mark. Let's review the first quarter performance and the year's outlook for each of our segments starting with Advanced Engineered Materials on slide 8 of the earnings presentation. Despite recessionary trends in the European economy, the AEM business delivered significant revenue and earnings growth sequentially. Net sales increased to $317 million, $25 million or approximately 9% above Q4 primarily due to higher seasonal volume as demand improved sequentially in the auto and industrial goods sectors of both North America and Europe. Operating EBITDA increased to $94 million, up $21 million or approximately 29% from the fourth quarter due to the higher volumes and growth in our affiliates.

Looking ahead to the second quarter, we expect earnings growth on increased volumes across the business, particularly with our industrial customers in both North America and Asia. North American auto builds are also expected to reflect good growth and should drive higher volumes. Additionally, affiliate earnings are expected to increase sequentially.

Let's now turn to consumer specialties on slide 9. Net sales were $264 million, down $42 million from the fourth quarter primarily due to the previously announced production interruption as well as normal seasonality in the quarter that resulted in a 17% reduction in volume sequentially. Our operations team did a great job of managing through the interruption, and as a result, we were able to provide more products to our customers in the quarter than we originally anticipated. Pricing increased 3% sequentially and partially offset the decrease in volume. Operating EBITDA was $66 million, down $7 million from Q4.

Looking forward to the second quarter of 2012, we had originally expected $20 million to $25 million of operating EBITDA which shifts from Q1 to Q2 due to the interruption. We now expect between $10 million and $15 million of incremental EBITDA in Q2 on a sequential basis. Also, dividends from our acetate China ventures, which are typically received in the second quarter, are expected to be modestly higher than last year's $78 million. As a result, we expect segment earnings in the first half to be higher than the same period last year and full-year earnings to be slightly higher than 2011.

Turning now to industrial specialties on slide 10. This business's performance reflects continued success in geographic growth and development of new innovative applications. Net sales increased to $309 million, $37 million, or approximately 14% above Q4 driven by strong volume growth in north America and Europe as demand increased for our innovative applications primarily in paint, coatings, adhesives, and paper. Our recent expansion in the acquisition of emulsions also benefited Q1. Pricing declined sequentially primarily in Europe and Asia due to product mix. Q1 earnings also benefited from favorable raw material costs. Operating EBITDA increased to $34 million, $4 million or approximately 13% above Q4.

As we look ahead, we expect second quarter volumes will increase globally due to higher demand for our innovative products, including the continued benefit from styrene butadiene replacement in paper and carpets. Our pricing initiatives should reflect the value of our applications as well as actions taken due to higher raw material prices. As a result, second-quarter earnings are expected to be up over Q1.

Let's now turn to Acetyl Intermediates on page 11. Net sales were up slightly to $852 million. Operating EBITDA was $83 million, a $12 million decrease from Q4 due to slower expected demand in Europe and Asia outside of China. Additionally, we experienced a significant spike in ethylene and other oil-based raw materials in the quarter. We do not believe current [margin] conditions are appropriate or reflective of the value of our acetyl products. As a result, toward the end of the first quarter we took action and idled our 600,000 ton Singapore acetic acid plant. We've also announced price increases for our acetyl products. We were seeing initial positive signs from our actions as margins improved towards the end of the first quarter and into the early part of the second quarter. We anticipate our actions will provide improved performance for this business in the second quarter.

Strategic affiliate's performance is highlighted on slide 12. In the first quarter, we reported $51 million of earnings from our strategic affiliates, a 19% increase over the prior year period. We also received a special cash dividend from one of our Asian strategic affiliates during the first quarter, some of which reflected dividends from prior earnings. Let me remind you that due to accounting rules our results do not reflect $37 million of proportional equity affiliate EBITDA as they are reported on a net income basis in our EBITDA. You can find further detail on our affiliate performance and this proportional share on table 8 of our earnings release.

Turning to slide 13, our adjusted free cash flow was $112 million in the first quarter of 2012 or more than double Q4s amount in part due to higher dividends from our strategic affiliates in Asia and lower interest expense. We deliver these results even with a higher pension contribution on a sequential basis and the payment of our annual bonuses in the first quarter.

Our 2012 outlook for adjusted free cash outflows is highlighted on slide 14. Our forecast for capital expenditures includes our previously announced accelerated industrial ethanol projects. We expect to continue to generate strong cash flows that position us to create value for our shareholders and that reflects our ongoing fiscal discipline. Additionally, the Board recently approved a 25% increase in our dividend which will be effective in August of this year. With that, I will now turn the call over to Jon for Q&A.

Thanks, Steven. We have a lot of people on the line today, so we would ask that you ask one question with one follow-up and then get back into the queue. So, with that, Derek, I will turn the call over to you.

(Operator Instructions) Our first question is coming from the line of David Begleiter from Deutsche Bank. Please proceed.

Good morning. Mark, could you just address some of the 2013 targets that your [predecessor] put out there in terms of both EBITDA and EPS?

Yes, David. I think 2013 -- so if we look at our business model today and look at the steps we are taking that will draw profitability, things like despondent shutdown, the expansion to name a couple of them, bringing the new ethanol plant online, the advances we are expecting in our base businesses, we can see numbers that push us into the mid $5 range before we do anything else to draw profitability. I want to remind you that we look at the cash generation selling these, we could have as much as $10 per share of cash at that time, too, so we are looking for ways to put that cash to work. So, I think originally, as Steve had commented, I think originally the team came out with a range in the $6 range and I certainly think that is still possible but we've had six pretty tough months in here and so we are really putting together a case to support that. Right now we can see $5.50 or something like that. Steven?

As Mark said, we got good line of sight to $5.50 and given the current slower economic market conditions, but the $6 we've talked about also included some assumptions on use of cash, David, as you recall. If we look at where we should finish this year or next year with cash flow given our strong cash generation, we should be in the neighborhood of $1.5 billion of cash we will continue to deploy in a fiscally responsible manner to drive earnings growth and return to shareholders and also help drive long-term growth as well.

Thank you. Mark, just on the Singapore shut down. Is that shutdown still ongoing? Why as the low-cost producer are you taking down capacity and perhaps supporting higher cost producers to be sustained here?

Yes, the plant is still idle as we speak, David. I think you probably look at it, Singapore is a competitive plant but I just want to say there was a lot of disruption in Asia outside of China this first quarter. We had a lot of asset going into that market as slow downs occurred in some of the base markets around the world, and so it was really a situation that we felt that we should just stop participating in that market and really start signaling our intent not to sell material at these prices. I think that's been a good financial move for us the way we look at it. So, I think we've gotten some good response pretty quickly from our customers relative to that, so that's a situation we are in. As soon as we can see a situation where margins have returned and demand has returned in a balanced fashion, then we will bring it back up. Until then, we will keep it idle.

I will just add one comment. Our Singapore plant is a low-cost facility. It's one of the lower cost out there. It's not the -- but it is our highest cost facility in our network. So, particularly when AOC is weak, we have in the past talked about that fact and that we will manage our capacity. If we find margins unacceptable, then we will bring that plant down to maximize that profitability of business.

Thank you very much.

Thanks, David.

Your next question is coming from the line of Edlain Rodriguez from Lazard Capital Markets. Please proceed.

Thank you. Good morning. Just one quick question on AEM. In terms of visibility, how much do you have in there? So far, are you seeing any improvement in demand in the key end markets for AEM?

Yes. That's one of the businesses where we've got a little bit longer outlook, Edlain, on the order books. As we moved into the second -- so, in the first quarter we saw weakness principally in Europe, automotive. You've seen the numbers by now. Auto builds were down low double digits in Europe so that affected us in the first quarter. And we also saw weakness in I would say broad and industrial applications as Europe moved into what appears to be a recession in the first quarter. As we look forward to the second quarter, North America and Asia appears stronger on a sequential basis. So, our early look is leading us to believe that we are going to have sequential earnings improvement in that business.

Okay. Just on AEM like for the auto industry, are you expecting -- what are you seeing in terms of shortage in nylon that seems potentially could impact auto builds globally. Is that a concern to you at all?

Can you --?

The potential impact of like a shortage of [nylon 12] that could impact auto builds. Is that a concern to you?

Edlain, we actually think it's an opportunity. If you look around the industry and you read the same things we do that are out in the public domain. Clearly, there is a concern about it. Early indications are that it doesn't effect auto production. Frankly, given some of the products that we have and the capabilities, we see it as an opportunity for us to play some of our products. We are in the process right now of doing it. So, near term, no issues. It's one of those things that sounds like it is a stay tuned as the industry wrestles with it, but we believe that there will be some expedited specifications that will have to be granted in order to -- for the industry to continue to produce.

Okay. Thank you.

Your next question is coming from the line of Bob Koort from Goldman Sachs. Please proceed.

Thank you. Good morning.

Morning, Bob.

Could you remind us about your raw materials situation AI. It seems like if I recall you had some favorable methanol and ethylene contracts. Are those still in existence and what is the outlook there? And then when you go into your intermediates, what are the raw materials specifically? You cited some benefit there. What was helpful to that division?

So, if you look at AI specifically, let me kind of first time to take you around the world and share with you how we think about it. We saw the pressure on raw materials as Mark and Steven said. We have set up contractually in North America where we are able to have contracts that allow us to pass through generally a good amount of that, I think probably about 50% that is tied to contracts Europe is a little bit more freely negotiated, although we do have some protection, probably more exposure there. You see that principally in ethylene and I think as a general statement where we have seen the real run-up is on the ethylene side so downstream derivatives that consume it through our chain and then in Asia, as you know, it's a more transactional environment. So, you are driven there not only by raw materials but frankly by supply and demand. And where you see the pinch that we're referring to, particularly in Asia and margins dropping is when you have a supply demand imbalance but you've got escalating raw materials. So, typically, those are businesses that have lagged because of that a quarter or two in the recovery of it. Generally speaking, we continue to push and to press for price increases out in the marketplace.

And on the intermediate side or the downstream industrial specialties, what was giving you help there?

Same thing. Remember, in that model we typically had lagged on the way up. We lagged on the way down as well. They saw a couple of things. One is they saw some price movement in the quarter on a year over year basis and certainly sequentially. We got some raw material benefits that were lagging as well principally out of Q4 sequentially into Q1.

Yes. That business (inaudible) raw materials. On a sequential basis, you saw the van prices were a little bit lower in some of the published data. So, the business tends to hold it for a short period of time.

And I asked on ethanol, is there any contract expiration with Southern? Can you talk about what your situation there is?

Long-term contract and got multiple years left on it.

Your next question will be coming from the line of P.J. Juvekar from Citi. Please proceed.

Good morning, Mark.

Good morning, P.J.

Just a quick question.

P.J., get a little closer to your mic, if you can. We are having trouble hearing you.

Sorry about that. Can you hear me?

That's good, P.J. Thank you.

Thank you. A quick question for you on the strategy. So far, Celanese acetyls used to run at a low-cost split and maximize volumes but with your arrival it seems like maybe you are focusing more on margin improvement rather than market share. Is there a change in strategy that I sense?

Well, it's important that Celanese maintain its position as a low-cost producer. So, we are investing a lot of money to keep that position. We just went through a gut check to validate that looking at every side around the world versus our capability and we still firmly believe we command that position. I think the real question for me is do you want to keep pushing that cost curve? We simply just want to run this business to make sure we maintain that position but drive profitability. That's currently what we are focused on. I don't think you should look at this as a change. We are not going to, over time, maintain our percent of market share, but you should look at it as we are going to make investments to extract higher value from asset and through the acetyl chain. If that means that we need to idle one plant, redirect product in a different direction, we will certainly be doing that, P.J.

Okay. And then a quick question for Steve about the $10 million charge. It's an outage which is part of ongoing business. I was wondering why you decided to call that out if it was not due to natural disasters like flood or hurricanes? Second, in fourth quarter you had mentioned that the charge would be more like $20 million and you took $10 million here, so can you just talk about the outage charge?

Yes. P.J., when we have a significant outage that's caused by some form of disaster, actually it was due to lightening, that we think we have either an insurance or legal claim that we can make against that, we will exclude the direct charge which is the $10 million that you are referring to. And then when we receive the insurance proceeds or the legal settlement, we exclude that as well. So, that's what the $10 million is. That's the direct cost that we had to incur as a result of the strike.

Set that aside for a minute and the $20 million to $25 million is different. That was the volume impact that we expected to see EBITDA shift from the first quarter to the second quarter which we obviously don't adjust that. That shows up as it shows up. The good news is we were able to get about $10 million more volume out in the first quarter than we thought we would be able to. We got the plant up and running a little bit faster than anticipated, so the first quarter had that volume benefit. As we move forward to the second quarter, we will make up the rest of the $25 million. So, on a sequential basis you will see volume improvements in that business because of the outage.

Your next question will be coming from the line of Nils Wallin from CLSA. Please proceed.

Good morning. Thanks for taking my question. In the past, Celanese had said there were some raw material or maybe footprint availability issues at Nanjing. So, given the new ability to produce your industrial ethanol when your plant is scaled up above your initial estimate of about 200,000 tons, will you be able to produce at that higher level? Will you need to source raw materials from somewhere else? Will there be any sort of constraints?

No, Nils. We can produce -- we've got sufficient asset to produce that ethanol. Is that your question?

Yes, yes.

If you look at the overall balance, as Mark said, we've got the bass raw materials we need to produce the product. We've got a fixed amount of [syn] gas. So, what we will do is we will actually cut back on production of other products like acetic acid and make ethanol which will on a net basis improve the profitability of the sight.

Thank you very much.

Your next question will be coming from the line of Kevin McCarthy from Bank of America Merrill Lynch. Please proceed.

Yes. Good morning. With regard to your decision to idle the 600 kilotons as asset at Singapore, I seem to recall that historically you were running a somewhat heavier feed slate there. Is that still the case? If so, is there any opportunity to retrofit that or do some operational work while the issue -- while the plant is down? Just trying to understand better whether this decision was taken as a function of unit cash margins or the market being loose in Asia?

Yes. Kevin, I think we shared with you in the past and when we look across the system we run a slate of different feed stocks into there across our systems some natural gas, some that could be oil-based, some that is coal-based. In the case of Singapore, it is an oil-based feed stock. It is a heavier feed stock. You are absolutely right and your memory is great. As we take a look at it, there has been some pressure. We have all seen the run-up in oil and where that has gone, so some of that is there. The other part of that is, as Mark has explained, we saw the oversupply conditioning, the oversupply condition as well that were not meeting our expectations on the margin.

Relative to the second part, yes, we look at that site. We are developing today some options about what we think we can do. Nothing near term, nothing imminent, nothing that can be done in the short-term. We continue to look at different options there that give us even better optionality for the site and over some period of time we hope that we can do something there.

Kevin, this is Mark. The big pinch that we saw in the first quarter really related to just the sloppiness in that market. Doug kind of outlined and saluted the feed stock basis here which isn't as favorable as it has been perhaps in the past, but that wasn't his primary reason. The reason was the market was just so sloppy that we pulled it out.

Okay. So, it sounds like if spreads to methanol widen back out in Asia you would turn the keys again and restart it. Is that fair?

Yes. I don't think that plant is going to be down forever, if that's what you're saying. I think it's a little bit of a temporary situation. We'd like to see the demand pick up a little bit. So the broad market it serves, which is India back in to China, you really would like to see that market improve a bit before you bring it on.

Got it. Final question, if I may. Mark, would you provide us with an update on ethanol as it relates to your greenfield projects and also any discussions you may be having on a partnership in the fuel market?

Yes, Kevin, I will. There is just a lot going on in this segment. It's all really, really good stuff. Starting with Houston, of course, you're bringing on our demonstration unit and I was just down there visiting with the team, the R&D team. That should be running in the June/July timeframe. Hopefully, you can make it down in September and you guys will get to see that unit.

The breakthroughs in technology I mentioned are spectacular. We've already materially advanced this technology and will advance it in time to take advantage of that. In Nanjing where our plant is now also under construction, we will be running next summer kind of timeframe. Beyond that, we are looking at the next expansion step, we are not ready to announce anything yet, but I can just say there's a lot of activity under way there.

On the industrial side, we have a hard push. That seems to be materializing as we have forecasted. If I look to the fuel side, we have tremendous activity under way in China working with the major players there and the potential governments to find a way to move into that market. I don't want to be too specific there, but I will say we are making lots of progress with our technology being validated by third-party sources in China that are given tremendous credibility to the virtues of ethanol and our ethanol process.

In the US, we have Olson's bill is out there. We are continuing to work with both the House and the Senate to look for venues to advance that legislation in a way that would open up a window of opportunity for us. It's certainly too early to call that and, to be frank, I don't think anything is going to happen this year with that given the political situation in Washington, but we are really posturing ourselves to be ready to hopefully roll something through next year.

Your next question is coming from the line of Laurence Alexander from Jefferies. Please proceed.

Good morning. This is Rob Walker on for Laurence. I guess on your cash outflow guidance, does that include (inaudible) enclosure costs and what do you expect for D&A this year? It seems like it has been bouncing around a little bit quarter to quarter.

Yes, it definitely includes the (inaudible) costs. On the D&A, we are going to be up a little bit this year versus last year because of the startup of the new capacity that we've got in Germany for our Advanced Engineered Materials business as well as in China. So you could think somewhere around $290 million to $300 million on D&A.

Great. Thanks. And then on the bridge to kind of the full year guidance, given kind of the comment around weakness persisting a bit longer into this year, what has improved versus mid January that is allowing you to maintain your outlook? I guess kind of going along with that, you expected acetic acid and segment margins to normalize by the end of Q2. Has that changed at all? Thanks.

No. Rob, that's a great question. We are certainly in a deeper hole in the first quarter than we anticipated. If you go back even before that, as everyone saw business sort of drop off at the end of last year with the recession in Europe primarily and a slowdown in China as they go through a political transition there. You've got this sort of wave of poor economic news just kind of roll through the system. We are seeing some favorable movement clearly in the acetyl arena that gives us some confidence we are going to move back to more of a historical level there in the second quarter, still some struggles in some of our other businesses that are more directly tied to the economic situation, particularly in Europe.

So, when you add up to get to the numbers that are out there for the year, we've got to produce a second half that's roughly equal to the first half. You know in the first half we've got a one-time dividend that rolls through that is roughly $0.40 of earnings. So, we've got to go out and find $0.40 of earnings. If you get back to normalized business, we might be able to find $0.40.

Three ways to tackle that. You can tackle that with volume and I talk about other things we are doing to make sure we have got every opportunity out there, we are moving material to the customers that want to. We can do it through margin and Doug mentioned our steps there to drive margins sequentially through the business. We do it through cost. When we add up the things that we have on a plate pushing there, we can get maybe two-thirds of that or so. So, I think we are dependant on the back end of this year being pretty good and we are going to have to go out and find some stuff, roughly $0.40 or so, to make that number. We have a lot of that work under way, but it is going to be a push, Rob, for us to do it.

Your next question will be coming from the line of Frank Mitsch from Wells Fargo Security. Please proceed.

Good morning and congratulations, Mark, on the new position.

Thanks, Frank.

Just make sure we are all on the same page here, when you talk about make the number you're talking about making a number north of 270 for 2012, correct?

You said 270? I think it's 470.

Yes.

We are very confident on the 270, by the way.

I figured I'd give you a softball for your first question from me.

No doubt about it, we are strong there. Frank, the number that's being floated around is 470. If you look, we did this last quarter and kind of what folks think we are going to do this quarter, you get in the 230 kind of range. We've got to roll that again. In this business when you look at the data, the fourth quarter has been kind of weak historically for some of these markets. We've got a lot of heavy lifting to do to make that 470. We targeted things to do, but you shouldn't think it is a slam dunk. We've got a lot of work to do to get it. To be perfectly honest, we don't have a clear line of sight exactly to that number that's out there.

Alright. Great. And then coming back to AI and the Singapore facility, that's obviously a large facility for you guys. What were your operating rates in the first quarter? What was the industry operating rate in the first quarter? And here we are three weeks or so into Q2. Any thoughts on where industry operating rates are currently?

Yes, Frank. If you kind of look at the beginning of the quarter, you would imagine particularly with the Chinese New Year you tend to be rather light going into the new year. You see it ramp up as you come out. I'd say across the quarter think of utilization probably in the mid to high 70%s. As we come out of Q1 going in to Q2, you've got probably 20%, 25% of industry capacity out today both largely planned, some unplanned so you start to see that utilization in the quarter ramp up substantially, probably high 80%s is where you end up to, maybe pushing 90% near term through the quarter.

All right. And with that you are obviously seeing pricing move up materially since the end of the first quarter. Roughly speaking, how much higher would you need to see prices go before you flip the switch back in Singapore?

I think I'll answer it this way. We look for demand to substantially improve and be able to substantially increase. Historically, that's the plants that earns back 15% to 20%. If you look at kind of margins that we've generated historically, we'd want to return back to probably low triple digit kind of margins that are out there.

All right. And let me ask you one other way. How much higher is Singapore than the average of the rest of Celanese's asset plants in terms of percentages? It's obviously your highest cost plant, so roughly how much higher is it than the other facilities right now?

Frank, that's a lot of specificity to get into. It is our higher cost plant and depends on the circumstances of what oil price is doing and a host of other factors to actually go through that math. I guess I would just ask you not to condemn this plant as being a plant that can't compete. We could be out there today and we could be making positive margin today with it. We really think it's the right thing for us and we are convinced that it's actually driving enhanced profitability for us by having it down at this point. Just speaking from my point of view, I'd like to see that business in that region, the volumetric demands in that region, pick up a bit where there's more stability in the market before it's back out there again.

Alright. Thank you so much.

Your next question is coming from the line of Mike Ritzenhaler from Piper Jaffray. Please proceed.

Good morning, everyone. I just wanted to make sure we understand the full-year views on each segment in terms of EBITDA earnings. So, I think what you had talked about in fourth quarter was growth in AEM and industrial specialties and flat expectations in AI and consume specialties and had been the view. It sounds to me like the only change to the full-year view is now earnings growth is expected in consumer specialty. I just wanted to see if you think that's a fair message?

Hi, Mike. We are having a real hard time hearing you, boss.

Sure. I will try to speak up.

Okay.

I think I got it, Mike, but tell me if I'd didn't get your whole question. One of the things we did expect was AI to offset the full impact of the margin expansion that we saw in the middle of last year with volume. Obviously, the first quarter challenges that we saw in Asia outside of China as well as Europe generally being weaker, that's going to be more of a challenge. That's what Mark was indicating when he was talking about a full year. CS, obviously we did indicate that it's going to be up for the full year. We previously thought it would be closer to flat. That helps offset some of that delta. As Mark said, we've got a number of areas, whether it's in AEM or across our portfolio that we are driving, getting closer to customer, identifying where we've got opportunities to drive price increases as well as looking at our overall cost structure and making sure we get productivity that covers any shortfalls in the market.

Okay. And then on the managing retrofit, I was wondering if you could give us an update on the project? There was a little color on that already given, but I was just wondering if there was some more project-driven milestones that you could discuss or if that's something that has to wait for a few more months?

Well, I'm the right person probably to do that. I was just there. Concrete is being poured and we are starting to go up with structural steel. You guys know the mechanical completion to date?

Second quarter. The key milestone was getting permits approved. It's all within our control now. Our degree of confidence goes up. I think here in the next few months the Clear Lake startup is a key milestone that I will look for. Then we will get this plant up and running by the middle of next year. If that changes we will let you know.

Okay. Perfect. One last question for me. Can you give us a sense for the performance of industrial specialties sort of ex the Ashland assets? I know most of the quarter included those assets, but just kind of organic versus inorganic year over year growth.

The simplest way probably to answer that is if you look at the quarter Ashland really had a very minor impact, very low single-digit impact into the numbers. So, as we look forward, it's complementary to the business. I think we have been public on the size of it. Think of somewhere adding in the range of $40 million to $50 million of top line growth into that business on a full annualized basis. Having said that, we don't complete and have the full annualized impact until 2013 given some of the integration issues and certain arrangements around the transaction and the transition of that business. So, think about a top-line $40 million, $50 million on a full-year basis 2013.

Small accretion this year, then our full run rate next year.

Okay. Great. Have a great day, guys.

Your final question will be coming from the line of Hassan Ahmed from Alembic Global. Please proceed.

Good morning, Mark.

Good morning.

Strategy-related question as well. If I remember correctly back in '07 you guys shut down a methanol facility out in Edmonton. Clearly that was during the period when the natural gas price for [GM] was very different. Now, as you guys are considering sort of boosting margins further, is there any thought given to maybe potentially setting up methanol or ethylene facilities here in the US?

Yes, yes.

So you would consider those?

Absolutely. I think it's hard to -- well, said another way, the natural gas situation in the United States is really just a great breakthrough in technology but it's also foretelling I think of what's going to be a very long period of attractive pricing here in the US. So, yes, we are certainly taking a look at that and see if we can take advantage of it.

Fair enough. Thanks so much.

Thank you.

At this time I am showing no further questions. I'd like to turn the call back to Mr. Jon Puckett for any closing remarks.

Okay. Thanks for your time this morning. I will be around today to answer questions. Appreciate it.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.