塞拉尼斯 (CE) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Celanese Corporation Q4 2012 earnings conference call. At this time all participants are in listen only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time.

(Operator Instructions)

As a reminder today's conference is being recorded. I would now like to turn over this conference call to Mr. Jon Puckett. You may begin, sir.

Thanks, Kevin, and welcome to the Celanese Corporation fourth quarter 2012 conference call. My name is Jon Puckett. With me today are Mark Rohr, Chairman and Chief Executive Officer; Stephen Sterin, Senior Vice President and Chief Financial Officer; Doug Madden, Chief Operating Officer; and Mark Oberle, Senior Vice President, Corporate Affairs.

The Celanese Corporation fourth quarter 2012 earnings release was distributed by business wire yesterday after market close. The slides for the call and our prepared comments for the quarter were also posted on our website www.Celanese.com in the investor section. All of these items have been submitted to the SEC in a current report on Form 8-K. As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements concerning, for example, Celanese Corporation's future objectives and results. Please note the cautionary language contained in the posted PowerPoint slides. Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included in the posted slides or the press release, as applicable.

This morning Mark Rohr will provide some introductory comments and then we will field your questions. I would now like to turn the call over to Mark.

Thanks, Jon, and welcome, everyone, to the call today. We released our prepared remarks last night, so I will do a brief summary of the quarter before opening the line for questions. For the quarter we reported adjusted earnings per share of $0.67 on revenue of $1.5 billion. This represents a 16% adjusted earnings growth year-over-year on expanded operating EBITDA margins in three out of four businesses. We generated strong cash flow again this quarter and recorded our second-highest operating cash flow of $722 million for the year. Adjusted free cash flow for the year was $339 million despite higher year-over-year capital spending on growth projects like ethanol. And this number also includes $100 million of voluntary pension -- US pension contribution. These results demonstrate the strength of our business, our technology platforms and, most importantly, the capability of our teams around the world.

Looking forward to 2013, we expect the economic environment to remain uncertain. And as we said last quarter, we are not planning on global economic growth to help Celanese this year. To drive earnings growth in 2013 we will focus on Celanese specific initiatives, like productivity, like our Acetate footprint rationalization, like the expansion of our Chinese facility in Nantong and like the planned startup of the ethanol production facility in Nanjing. We also expect our efforts to increase the effectiveness and speed of new product introductions to help drive earnings growth this year. The slowdown in Asia and Europe will increase the percentage of earnings we realize in higher tax jurisdictions, particularly the US, increasing our 2013 forecasted adjusted tax rate by 200 basis point to 19% or about 10% per share impact for 2013. Nonetheless, we continue to believe the positive effect of our actions will yield adjusted EPS growth between $0.45 and $0.50 in 2013.

Now, before we move to Q&A, I want to expect my gratitude to our Chief Operating Officer, Doug Madden. Doug is going to retire at the end of March, and he's been a critical part of the organization for the last 20 years. He has led multiple departments, divisions, and our Corporation. We've all benefited from his knowledge about the industry and the world chemistry. And Doug himself transformed Celanese to the customer focused business is today, and he set the foundation for the innovative force it will become tomorrow. Doug, on behalf of the entire Celanese team, I want to thank you for your many contributions and wish you and Patti all the best in retirement. With that, I'll turn the call over to Jon for Q&A.

Thanks, Mark. Kevin, will you give the instructions, and let me just remind folks that we ask you to have one question and one follow-up and -- just so we can get everybody's questions in.

(Operator Instructions)

Kevin McCarthy, Bank of America.

Mark, would you provide an update on your discussions related to fuel ethanol in Indonesia and China please?

Yes, thanks, Kevin. We continue to work with Pertamina in Indonesia. We are nearing the end of the first phase of that study. And we are looking forward and think we will be in a position before too long to announce movement into a second phase for that project. If you look at that project in a -- under a big perspective, ethanol, fuel ethanol in Indonesia really works well. We have abundant availability of low-cost coal. We have an inherent demand in the economy for clean fuel, growing fuel demand. There's a lot of imported fuel that could be offset, and there is also subsidies that the government pays. So it's a really good economic formula. Pertamina is excited. We're excited, but we really have some more work to do. So I hope we can announce something before too long about moving into the second phase. And currently our view is that we should be in a position by the end of this year to have a go or no go decision on that project. In China -- go ahead, I'm sorry.

Please go-ahead.

In China we are continuing to work with some partners over there, and I will just leave it at that. I think China is a more complex model in many ways. It's a more complex fuel distribution system, a lot of regional players in China. I will say we are making progress, and I hope that we can make some announcements in China before too long.

And then as a follow-up, Mark just to clarify the time line on the 275 kilotons that you plan to add at Nanjing for industrial ethanol, I think the prepared remarks had referenced a late 2013 start up. I don't mean to split hairs, but I have the impression that it was perhaps mid-2013, July type time frame. Is that the case, or has there been any material change there?

Well part of it is our -- we are creating some confusion, and we don't mean to. We will be mechanically complete in end of June, early July, and we are commissioning after that. And we have a plan to bring it on slowly, and that's not because we have any concerns about the technology. But we want to move this material into markets, and we have got a commercialization effort that's going to push it around China. So I'm trying to -- when I say the third-quarter, I think before you really see some impact it's going to be really third and fourth quarter.

Understood. Thanks without clarification.

Operator, let's move to the next question.

Duffy Fischer, Barclays.

A couple questions. One, you mentioned that you weren't planning any help from GDP but, I'm just -- if I go to slide 12, you talk about some expected improvement in the second half. Can you just quantify how much help your expecting in the second half? And this was under the [acet] fuels intermediate bullet there.

Well, it's a broad statement. There are sub segments where we are expecting some goodness from the economy, but we've also got some badness. So, an example of that would be is we are expecting Emulsions to pick up as construction comes back a bit. But we have been struggling a bit with EVA going photovoltaic, so there's some offset. What I'm trying to say is that on a balanced basis, GDP is not going to be doing a lot for us this year. The comment about the second half of the year, really relates to broadly what we've seen in the last two or three years which is a stronger first half and actually a weaker second half, and we really need this year to not have that repeated. So we believe, as we come out of Chinese new year, we are going to see some strengthening. We look at capacity utilization in the AI business and Doug can talk about that a bit as well. We are seeing that push up. It's been mid to low 70s, maybe it's pushed up a bit higher in the 70s now. So, we're seeing some positive signs, and so were depending on a little bit stronger second half to make these numbers.

Yes, I think -- Duffy, it's Doug. I'll just comment, too, following on Mark's comments. You follow what's going on in China and the fact that they are even reflecting I think in some of there public data, a slower start up or ramp up around this year, 80% GDP -- a little bit more second half than first half. If you look at some of the key drivers for our markets and our industries, you know that we play a big role in autos in Europe. There you're seeing the same kind of demographic I guess in terms of auto builds, a little bit lighter in the first half of the year, building and stronger net-net just modestly down year-over-year. So I think you kind of take a look at that as the underlying to the GDP is where we're trying to suggest we see the business following.

Okay, great. And then a couple traders and consultants have mentioned that your Singapore plant has run a little bit in the last couple months? Can you clarify kind of is that plant up and running, and will it be running in the first half of this year?

Singapore is running now, yes.

Great. Thank you.

Let's move on to the next question.

Mike Ritzenthaler, Piper Jaffray.

Forbes said this morning the EU market is much weaker than the most recent expectations. Can you expound for us the risk that the decline of 3% that I think you embedded in your expectations comes in materially lower kind of based on their commentary and (technical difficulty) the surplus capacity in Europe that's been plaguing the various OEMs?

Yes, Mike. When you look at autos in Europe, it's down year-over-year right now, high single digits, probably 9%, down, something like that that's the kind of numbers we see. For the full year, the forecast is that it will be down 3%. [A lot of bills]. So as -- we have made the earlier comments about the back of the year. There are part of the numbers that you see built in is pretty anemic performance out of Europe does have the second stronger than the first half. So, that's how I'd characterize that. We've also made comments about increased penetration, and we're seeing that really in Asia where we are seeing numbers in the 40% increased sales in automotive -- in the automotive in that part of the world over the last year.

Mike, let me add a little bit more to that. If you kind of walk the world we started with your question in Europe, and Mark's kind of give you the data on Europe. But think about net-net year-over-year, Europe down a couple of percent, US expected to be up by probably the same amount. And Asia builds up substantially more probably high single digits as a percent. As Mark said, we are seeing great growth year-over-year in our business in Asia relative to that industry. And if you'll recall, we see great growth in the amount of value and the amount of pounds that we put on every vehicle when we think about North America and EU, the more mature regions of the world. We see some places where that's growing high single digits kind of growth year-over-year which has a way of compensating or maybe modestly lower auto builds as well. So, frankly, overall we still see reasonably good industry and market for 2013.

Okay. And then your 2013 qualitative outlook statements it's clear that year-over-year growth is expected in Consumer Specialties. Industrial Specialties might be flat, acetyl intermediates may be -- may see some on growth. But I guess to expound on that AEM question a bit, the expectations were I guess a little vague. Based on the innovation you spoke about, would it appear that you are expecting growth in AEM next year as that penetration increases and as you see growth in some of these pockets?

Yes, I think we are expecting modest growth, but it's -- we've said flat because it's closer to flat than growing.

Okay. Fair enough. Thanks, guys.

Okay, Kevin let's move on to the next question.

PJ Juvekar, Citi.

A question on your ethanol plant in Nanjing. You are building this retrofit. It's a new technology, so do you think your other potential partners in China are likely to wait and see how the Nanjing plant operates before they are financing with you? Or, --

Yes, PJ. There clearly is where we've had folks have a look at the technology and, in the pilot plant, there is a desire to see the plant that we're building operational. And so the project development is kind of revolving around that to some extent. So, yes, I think you are calling that right.

And, the other question I have is, there is this new fuel standards of 54 miles per gallon of fuel efficiency and, as a result, plastic use in cars is likely to go up. I just want to figure out how you are positioned to take advantage of that? Because a lot of these new materials that are being proposed like carbon fiber are all on the outside of the car when you materials or more under the hood and inside of the car. So, where do you think that growth occurs in this new materials?

Well, you are referring to fuel efficiency, and the impact -- one of the real drivers of that is lightness in vehicles which really plays well into our AEM business. And we are seeing that, we made a few references to actually to some of the composite materials we are putting in cars. And those are very attractive, and we are seeing some pretty strong growth in that arena. We are also seeing manufacturers step out in areas where they've not considered polymers before in things like automobile rims even. We are very engaged in the kind of process. So, we're quite confident there's going to be a lot of growth in there. We have some advantages over carbon fiber, so we're --. I don't know, Doug, if you've got any numbers that pop into your head, but we feel pretty good about our ability to penetrate in that space.

No, I guess, PJ, the only thing I could add is, is that if you just kind of look at -- you're talking about in some cases hundreds and in some cases maybe thousands of different applications all with the intent of light weighting those vehicles. There are models out there that I can tell you from our own business that we're doubling the size on particular models putting our polymers on those vehicles. Others don't grow quite as rapidly so Mark mentioned a few, still early stages composite materials on rims and wheels that -- not yet commercialized but clearly in line with that longer term goal. Those are the kind of materials that our intended to help reach those fuel efficiencies. Putting products into structural things like seats and giving strength is a structural item or typical ones even with dashboards but light weighting those even further with some of the work that we're doing on our polymers. So I'd just say the work that we do with the OEMs is consistent with that long-term without long-term standard and its growth for Celanese.

PJ, to build on that a little bit, too, is we have advanced this technology largely in passenger vehicles, and there other applications that are also very interested in moving this way in other arenas so we have the ability to move horizontally we think, too, in a fashion. So we've got not only the structural growth that Doug talked about in automotive, but I think we have other places that we are exploring and getting some good receptivity to our technology.

David Begleiter, and Deutsche Bank.

In China, I know it's still early in the year, but any signs of visibility in terms of improved demand from the construction end market?

In the US, yes.

How about China?

China, I'm shaking my head no. I'm not seeing it yet. Doug?

David, I think -- you know as we go into the new year, it's typically post the new year before we would see anything. I'd say that in China we are modestly encouraged early on with the order books. But from years gone by we learned that sometime between, for this year, mid-to-later February before you see them come out of it. Last year they came out, and it wasn't quite as strong we all know now, so we are cautiously optimistic, but I think we need some time here to see how things develop.

And Mark, just on Kelsterbach, given the lower European volumes, how much of a drag is a facility? How much is it running utilized right now and what's the impact from depreciation or overhead cost there?

Well, volumes are pretty good in Kelsterbach. What you tend to see, you tend to see a mix impact, David, more than anything where we may have to move in lower end applications if the high-end stuff is not available, We are actually going to be increasing volumes year-over-year out of Kelsterbach. You may recall, we brought on the second line late in the year, and so we have higher volume -- volumetric output year-over-year. So, you're going actually to see more contribution from that side this year than last. The depreciation impact of that is pretty onerous period we in effect doubled our depreciation in that segment. Part of that is accounting treatments, and maybe we can ask Steven to comment on that.

Yes. We're already running at the full run rates on depreciation so you won't see anymore moving in 2013. What you will see, when we complete the demolition of the old site, is all the proceeds we receive from the Kelsterbach government will come through the P&L with a large gain, offset by the old carrying value of the old plant. So, unfortunately, even though we didn't spend that capital the accounting requirements required of the basically step of the new plant to full value even though we only contributed a very small portion of the total amount. So that's already reflected in depreciation and, unfortunately, will continue to be so. It's about $0.20 a share, and then we'll have a large one-time gain hopefully later this year when we complete the demolition.

Kevin, let's move to the next question.

Laurence Alexander, Jeffrey.

First could you give an update on your strategic review and any businesses that or product lines that you think could be either right-sized or optimized?

Yes, Laurence, I'm happy to talk about the strategic review. I don't think -- I don't want to get into that in too much specifics here, but what I will say is we've gone through a six-month process of really assessing in-depth each business, the competitive landscape, the -- our ability to innovate and move into markets. We've got third-party validation of our belief systems around the value of these products and the customers. And out of that we've outlined a path to get us to $2 billion of EBITDA and it is a reasonable path. We will share a lot of details with you guys on that when we have our Investor Day here this coming year.

We have said in there are, hurdles and obligations that we fill firm return on capital need to be met for our businesses to satisfy the expectations that we put on ourselves and the shareholders have on us. And there are some businesses that currently don't meet those expectations. You guys can look at our performance, and you know which businesses those are. So, we are not calling out anybody as being a failure, and we are working hard to try to change that, and we have plans to change that. But these businesses all need to get to a point where they are contributing in a positive sense to the growth and profitability of this Corporation.

And then secondly on the Acetyl Intermediates are there any derivative areas where you can see any scope for a pricing cycle in the next two years or do you think demand prospects are just too muted for that?

I think the latter, Laurence. We need -- we still need to help the global economy are healthier global economy. Most of those today are from -- I wouldn't even call them well-balanced I would say that there is over capacity that sits within the world even on some of those derivatives. Recall a big part of those obviously got vinyl acetate monomer goes downstream heavily into construction related -- ultimately paints and coatings -- things that our consumed in that industry. Our esters, Europe and Asia tied a large part to the auto industry and coatings on those autos. So, the short answer is we need a healthier global economy I think before we could see something in the next couple of years barring any other unforeseen event that would occur.

Kevin, let's move to the next question.

[Geoffrey Clark], JP Morgan.

Your volume contraction in Consumer Specialties of 13% is that it one time event that comes from the closure of Spondon? Or, is that something that will weigh into 2013 results?

So, Geoff, the contraction does come from the closure of our Spondon site in the fourth quarter. Just about all of that. I suspect as we go through '13 and the assumptions is that, that we are able to offset some of that is I think you saw in our fourth quarter of this year in those results, where we continue to work to get a little bit more out of the rest of the footprint. Also you'll see the expansion coming out of Nantong and the impact of that in the business performance. So, there will be some net contraction but it won't be from what you saw or what you are seeing in Q4 going forward.

So, think about as Doug said, a little bit less top like contraction than you saw in Q4, lower energy and overall fixed spending within our plant network and then higher dividends coming in also from our joint ventures as we shift some capacity around there as well. So, on a net basis, significant improvement in the profitability of Consumer Specialties. [Is hitting] the geography of where earnings come from.

Okay. And as far as Indonesia and Pertamina go, have they committed to an ethanol-based fuel instead of, say, a methanol-based fuel or methanol derivatives? Or, is that something that they continue to compare and to contemplate?

Well, I know that the government has been very clear that ethanol is the desired fuel for them. Given that they've got significant coal would they look at additions to that? Potentially they could longer term, but we look today at the price point of our technology, environmental benefits that come with it, the high-octane and the lack of need for infrastructure changes. It gives them a direct reduction in gasoline imports. So, ethanol, they've clear said, is the preferred option today. Most countries like Indonesia will look for as many different alternatives as possible, and there's not going to be just one solution, but we think TCF will be part of any solution in Indonesia.

Were not aware of any activity, though, if that's your question, Geoff, to go out and try to bring in methanol for fuel.

Okay, good. Thank you very much.

Let's move to the next question.

Nils Wallin, CLSA.

A question about China's plans to build around 20 or so to methanol to olefins plants. Curious as to what your view would be on how that might change the cost structure for your acetic acid plants there in Nanjing.

Well, let me start this and, Doug, hop in here. I think the trend is going to be for rising methanol -- increasing methanol pricing. In China today it is $360 to $370 a ton, and there's some views that it can push up higher than that. But be mindful you can produce methanol in low-cost places and ship it for about $60 a ton from anywhere in the world. So I'm not sure, what -- how high it's actually going to go. But we expect methanol is going to go higher, and that puts a little bit of pressure on acid and that will roll through into a little bit higher acid pricing we think. Doug, is that fair?

Nothing to do that.

Okay. Thanks and then, just on your proposed methanol plant in Texas. I know not exactly a competitor, but someone in the space has just inked a long-term natural gas contract for their proposed plant. What type of interest are you seeing from the ENTs to be able to do a long-term gas contract for your Clear Lake plant?

It's an option for us as well.

Great. Thanks very much.

Kevin, let's move to the next question.

Frank Mitsch, Wells Fargo.

And best wishes on your pending retirement, Doug.

Thank you, Frank, appreciate it.

I know earlier, Mark, you were saying that acetic acid operative rates were in the low to mid 70s can you we cap where they were in the fourth quarter, where you saw them through the month of January? And what are you actually running your Singapore plant? What operating rates are you running that Singapore plant at right now?

Yes, so, Frank, let me try to walk you through, if you take fourth quarter and where they were -- not any kind of appreciable difference from where we were. Typically this -- the industry and the business where you see in October, November, a little bit of a pullback in December on those rates, but I think Mark said mid 70s today. About the same place and frankly if you look at the margins that about equal to where they are now. So, no significant difference in the assumptions going forward. I think barring through the turnaround season for Q2, Q3 our assumption is that it's a fairly stable environment. Your second question, Frank was about Singapore?

Right.

Yes. We're running Singapore today consistent with the way we did in the fourth quarter. I think we shared with you in the past that as we run that unit we run it based upon demand it's based on the underlying market needs. And so it continues to operate at this point right now on the same 24/7 cycle, and I won't speculate about the future.

Hell, we'd love to speculate about the future. Why not just step out there? (laughter) Just following up on the equity income line it ticked up obviously nicely year-over-year. You mentioned that it was -- you had a turnaround in the year-earlier period, but, however, it also ticked up nicely sequentially. What should be expecting out of your equity income earnings as we progress into 2013?

There's two items to keep in mind when you look at equity earnings year-over-year in this quarter in particular. First of all there's $22 million of earnings in there that relate to some debt forgiveness at one of our affiliates that is on the GAAP P&L, but we excluded it from our adjusted EPS. So, that takes your $79 million $80 down to about $58 million. So, you're up about $10 million year-over-year. And that's principally driven by the fact that we had a turnaround in one of our Asian joint ventures in the fourth quarter of last year. So, I would say if you look at equity earnings ex those two items you're kind of running at a normalized level. As we've said, we expect our equity affiliates to show similar type of growth that we see in our business, particularly in AEM, in Consumer Specialties, which on the cost side you'll see accelerated growth as a result of the expansion as well as what we talked about earlier which is the consolidation of our manufacturing footprint. So, I think you adjust for those two items and have a normal growth rate on that.

Thank you so much.

Kevin, let's move to the next question.

Hassan Ahmed, Alembic Global Advisors.

Question about the Clear Lake methanol facility. In your prepared remarks you essentially talked about how you are continuing negotiations with potential partners, and you expect permitting to be wrapped up by 2013. And almost shortly thereafter by mid- 2015 you expect construction to be complete. So, I guess my question is twofold. One, is that from these remarks, it seems there really aren't any per se delays associated with EP&C work or construction work or the like, particularly keeping in mind the slug of new be it methanol, ethylene and the like capacity coming on line. That's one part, and the second I guess question is that are you seeing or beginning to see any cap to the cost inflation out there as well?

Great questions. So, we're moving towards the conclusions of negotiations, and the parties are talking with respective boards so we think we will be in a position shortly to be more definitive about partnership and what were doing there. The permitting processes that you called out are currently underway, and in the state of Texas it just takes a while to work to through that process. We don't anticipate a problem with that, so we'll actually begin construction and begin real detailed engineering. We'll actually order equipment and things like that before we have the final permits. We just can't break ground until we have the permits. We should have a view that even though it's the end of the year for the final permits, it is not any huge delay for impact on the project.

Regarding the inflation, we're actually ahead of the curve a bit so we're on the other side of that curve. We're getting excellent pricing on big equipment and raw materials because folks are trying to get their shops up and running and so we're early -- an early entrance for that process. So, you're right in saying it's going to come, but I think we're going to be on the front of that wave and not behind it.

Very good. Thanks so much, Mark.

Thanks. Let's move to the next question.

Bob Koort, Goldman Sachs.

And good luck, Doug and thanks for the new format on the conference call. Obviously, we like to have questions, and we like to have the night before to look at everything. So, appreciate that. My questions, a couple around the Indonesian opportunity. And I guess specifically after meeting with you guys, the industry Minister there was suggesting that you guys would spend $2 billion over the next several years. So, one, I'm wondering is that what you have committed to and if so, what does that get you? And then, is it reasonable still, from your initial agreement with Pertamina to expect production by the end of '14?

Yes. I think the all-in project cost is going to be $2 billion-ish maybe a little north of $2 billion. And be mindful that you are going into Indonesia and really starting from scratch to build the process. Our piece of that would be a heart cut if you think of that. I think the numbers we batted around were $600 million-ish, and we have a fraction of that or portion of that so a lower -- a much lower capital number, and returns on that our very good. And again, that's made possible because of the great economics associated with coal that are available in Indonesia. No, I think what we are saying, is by the end of the year we -- the belief is as we get to a point where we can say we are doing this project full steam head, but if you look at project completion schedule, we don't have a number on that. So, I think you're looking at '16 or '17 to be up and running, that kind of time.

Yes, we typically set I think about 30 months from all approvals to get these projects up and running, Bob.

Okay.

In this space, Bob, right. Will be done so far is that identified three sites and the team is ready to go out and say it is this site. We've done a broad permitting process, we have to get a [fop] specific permit. That's where we our kind of in the debate process with Pertamina and the Indonesian government.

And is there any way to ship Singapore acetic chemistries and output down to Indonesia to speed up the process? Or, does it really count on home-baked coal there to make it work?

Yes, not practical. I mean you could do it I guess, academically you could do it, but it wouldn't add a lot to the project -- it wouldn't reduce the project timeline very much, because you'd still need to build ethanol, you'd still need to build all the infrastructures, you'd still need all the [delete] hydrogen. I think no. I think this is going to be in Indonesian Project.

And if I could ask Mark a question I noticed the US Court of Appeals recently gave a little bit of a stiff arm to some of the cellulosic biofuel mandates. Is there any small chance, ray of hope that something could happen for coal or gas based ethanol in US getting a better shot at the table?

Well, Bob, I think that 2013 is clearly going to be a year where the renewable fuel standard has a lot of debate. What I can say is that we are a part of that debate. We will continue to be a part of the debate. We will see how things go as we move forward. But, I'll say the same thing that we said for a while now which is changing any law, and maybe this law in particular is very challenging, but it's clear it's going to be under scrutiny during this session.

Great. Thank you.

Thanks, Bob. Let's move to the next question, Kevin.

Vincent Andrews, Morgan Stanley.

Quick question on the Nanjing ethanol facility and commercialization effort. Can you just help us sort of understand what are the logistics or the gating events that our going to roll through that ramp-up whether it's customer relationships or just sort of timing in bringing the plant up? What are the specifics that drive that?

Well I mention the mechanical completion so call that July. And then you've got commissioning and start up which adds some time to that. The team is out today meeting with customers all over China. We're segregating those customers from between those that our spot buyers and those who would like a contract position. We are looking at regional pricing and net backs that our available, and it moves around a lot depending on where you are in China. We are looking at the industrial segments that the ethanol is consumed in to decide where we want to put our volume, and so that is a process we are going through. We will start -- we will have those contract positions finalized and stuff as the plant is coming up we'll be starting the new material to the consumers that provide us the best net back. Does that answer your question?

Yes, that's exactly what I wanted to know. And then just as a follow-up on Clear Lake, it sounds like you guys are very much in the direction of going forward with constructing the facility so would you say there's a very low probability of not putting capital in the ground and instead signing some type of new contract?

Yes, it's a low probability.

Okay. Thanks very much.

Kevin, let's move to the next question, and will have this be the last question.

John McNulty, Credit Suisse.

(inaudible) facility. When we look at the pricing and the utilization rates year-over-year they haven't changed all that much and yet Singapore is up and running now, and you would shut it down around this time last year. So I guess I don't exactly understand what changed. Maybe you can help us to understand why Singapore is running, why it actually makes sense and profit wise what it may be contributing for you?

Yes, let me -- I'll take a shot at this and then Steven can jump in. Jon, if you kind of walk away and think about it, remember when you talk about last year at this time Q4, year-on-year recall that as we went to the quarter we were coming off of a very strong third-quarter going into the fourth quarter. We were strong in October, and then we saw a decelerating that occurred in November, December which turned to be the precursor of I think what certainly we experienced in 2012. The fact is when you look at pricing and margins across the year, they probably moved up and down within a range. But, as we saw, the second half a little bit more of the volume that I'll say firmed up. If that's in a context that we saw a little bit stronger second half, certainly we than did the first half. We ran and we -- as I said before, we run Singapore based upon the underlying market demand, and what we did see through the course of I'll call it mid to later second half, is Southeast Asia got better, better relative to the first half, not better relative to a norm.

The other parts of this is, we operate a global footprint. We've got to balance our system globally as well to the highest efficiencies based around supplying around the world. So, there's elements of that as well that goes into the plan. So, margins that you are seeing today are relatively similar to Q4 last year. Frankly, with what we saw through the year, with the weaknesses in Southeast Asia, and with Europe, we feel actually pretty good about where we are and where we weathered that storm. And I think also suggest that, at least in our minds, maybe that's the bottom.

Okay, great. Thanks for the additional color, I appreciate it.

And now I would like to turn the conference back over to Jon Puckett for closing marks.

Thank you, everybody, for your time and interest in Celanese. We will be around to answer follow-up questions later today.

Ladies and gentlemen that concludes today's presentation. You may now disconnect and have a wonderful day.