塞拉尼斯 (CE) 2014 Q4 法說會逐字稿

Good morning, and welcome to the Celanese fourth-quarter 2014 earnings conference call.

(Operator Instructions)

Please note: This event is being recorded.

I would now like to turn the conference over to Jon Puckett. Please go ahead.

Thanks, Drew. Welcome to the Celanese Corporation fourth-quarter 2014 conference call. My name is Jon Puckett, Vice President of Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer; and Chris Jensen, Senior Vice President, Finance.

The Celanese Corporation fourth-quarter 2014 earnings release was distributed via 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 Relations section.

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 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 on our website in the Investor Relations section under Financial Information. The earnings release, non-GAAP reconciliations, presentation, and prepared comments have been submitted to the SEC in a current report on Form 8-K.

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

Thanks, John, and good morning, everyone. Our prepared remarks were released with the earnings, so I'll keep my comments brief, and then open the line for your questions. I'm pleased to report the completion of a record year with a record quarter, reporting 2014 adjusted earnings of $5.67 per share, which reflects 26% growth over the prior year.

For the fourth quarter, we reported adjusted earnings of $1.28 per share. That's a 23% growth year over year. Our results were driven by changing dynamics in the acetyl chain; the ability of our materials business to identify, develop and provide specific materials to our customers; and strong commercial and manufacturing performance.

Sales for the year totaled $6.8 billion. That's an increase of 4.5%. Operating cash flow totaled $962 million, setting a record for the Company. Consolidated segment income margins increased 240 basis points to 18.6%; really great performance.

As we start 2015, our underlying Business is quite healthy, and should help us offset some of the headwinds we expect to see through the year, particularly the falling euro to US dollar exchange rate, lower crude oil, impacts on pricing and margins in the petrochemical industry, lower energy and raw material costs, the cellulosic inventory correction, and uncertainty in the macroeconomic environment. We have a solid list of actions our teams are working that should help minimize the impact of some of these headwinds, and set us up for growth through the year and into 2016. In this volatile environment, we expect first-quarter earnings to be consistent year over year, and our full year to be in the range of $5 to $5.50 per share.

With that, I'll now turn it over to Jon for Q&A.

Thanks, Mark. I'd like to remind everybody that we'd like you to ask one question and one follow-up, and then we'll move to the next. Drew, go ahead.

We will now begin the question-and-answer session.

(Operator Instructions)

The first question comes from Duffy Fischer of Barclays. Please go ahead.

A question on tow: One of your competitors called out some inventory issues after Q2 of last year. You guys, at that time, didn't see it; now it seems to be hitting you. Can you just talk about -- what's your visibility in that market? How comfortable are you with the analysis that you've done that you'll be able to deliver your internal budget against that business?

Thanks, Duffy. If I go back a bit in time, Duffy, it became apparent to us, as we were shutting down Spondon -- there had been actually a slow -- not a slow, but a trend in a part of the industry to maintain fairly high tow volumes. And I think that was a reflection of the overall tightness in capacity that existed for several years. We took down Spondon in 2012, and that -- in late 2012 -- and that increased yet again. We've reminded folks of that.

Our customers have, for the most part, managed that pretty well. I think others had gotten early signals of that, and reported those results to you.

We're talking just directly with our customers, Duffy, and they seem to indicate with tremendous sincerity that they want to go ahead and take a step-change in inventory. When they look beyond that, they think it will return. The insight I just have is dealing with the customers that we interface with.

Okay. Then, just on the numbers, you called out $0.30. If I run that through your P&L, that's about $60 million in EBIT; run that through the margins in that segment, and that's about $200 million in revenue, roughly, which is about a third of the first-half revenue from last year. Are those the right numbers -- that we could actually see revenue down a third in that segment, in the first half?

Yes, I don't tend to look at it that way for -- we really look at EBIT. EBIT numbers are absolutely, I think, what we're expecting.

Okay, great. Thanks, fellows.

Thanks, Duffy. Drew, let's move on to the next question.

Next question comes from David Begleiter of Deutsche Bank. Please go ahead.

Thank you, good morning. Mark, also on tow, what will you get pricing-wise this year? Is tow pricing going to be up or down? Any change in your view as to the longer-term demand trends? Actually, what's your view right now as to the long-term demand trends in tow going forward?

Yes, we have some mix effects in price, because of swap agreements we have. But generally speaking, the industry pushed pricing early in the cycle, and we got a little bit of pricing. As we ended the cycle, we gave up some pricing. Pricing net-net with mix is down a little bit year over year, as well, I would say, David, in that.

The general trends that we see -- I think if I look at the world outside of China, we've been in this gradual decline. We haven't seen that slope change very much. If you look at China, China certainly took a step-change early last year that we talked at length about. They seem to be running pretty steady rates now, and are anticipating pretty flat volume year over year.

Very good. Mark, lastly, on acetyl intermediates, can you help us with the bridge of earnings in 2015 versus 2014, taking into account the hit from the expire of the methanol contract, the over-earning of VAM in 2014? Can you help us with the bridge there, 2014 versus 2015, in AI?

Yes, David, it's Chris. The methanol contract -- we've talked about that being, I think, $0.40 to $0.60 per share on a year-over-year basis. If methanol stays in the lower level that it is now, we're going to be at the low end of that estimate.

I think your other question was more around the VAM industry shift. It's really hard to clearly separate that from just everything else going on in the Business -- in particular, our team's efforts this past year to really change the way we go to market, the way we approach customers, pricing, placing volumes. But having said all that, if we were guessing, I think we would guess that that number may be in the $70 million to $80 million year on year.

In terms of the VAM decline year over year?

Yes, David. That's the number Chris shared with you. That's the number we use internally as we range-find it. It's very hard to quantify, but right now, as we look at a bridge, that's the number that we internalize.

Thank you.

Thanks, David. Drew, let's move to the next.

The next question comes from Laurence Alexander of Jefferies. Please go ahead

Good morning. There was a comment in the remarks about broader de-stocking at both your customers and your suppliers. Can you elaborate a little bit on what you're seeing by end market, how you think that might distort first-half trends versus back half, and implications for your working capital?

Yes, primarily in the acetyl chain, and how much of it is -- beyond the cellulose -- and I'll talk about cellulose again, if you like. But what we've seen in the acetyl chain is a lot of -- the folks that are closer to the petrochemical industry -- people are just taking their time to purchase, David, is what I would say. They're looking for -- I mean, Laurence -- they're looking for the bottom.

We've seen some orders slip as we ended the year, into January. We've seen some slippage out of January. That's what I'm trying to respond to.

I think, until we get a sense of really where the floor is, and where prices are moving, a lot of folks, if they can delay purchases, are going to do so. It's one of the reasons I think where my personal view is all of us are going to be off to a little bit of a slow start as we begin the year.

The second comment I would make to that, Laurence, is Chinese new year, as you know, falls a bit late. This year it falls in mid-February-ish. That, in Asia, again, as you know so well, creates a little bit of a conundrum as folks try to really anticipate what the world looks like after Chinese new year.

In terms of what that might mean for your working capital days this year?

This is Chris. It's a little difficult to predict, because it will really depend on that slope on demand and volumes. You look back at 2014 and the working capital performance, the businesses did a really nice job of controlling that. We tend to look at that as working capital as a percentage of revenues, and we experienced some levels that were really good in 2014. They managed that quite tightly. We watch this.

Of course, the risk you face in a deflationary environment is that you're holding some inventory that was produced at a higher cost than your current procurement of raw materials would suggest. Yes, there is a risk that if you see demand pressures, you get a little bit of creep, when you're looking at it as a percentage of revenues the way that we do.

Thank you.

Thanks, Laurence. Drew, let's move to the next.

The next question comes from John McNulty of Credit Suisse. Please go ahead.

Yes, good morning. Thanks for taking my question. With regard to the FX headwinds that you had highlighted, they seemed a little bit bigger than I recall the moves being in the past. I'm wondering how much of that's tied to some of the closures that you've done in Europe, and how much product you're maybe moving from, say, either the US or other regions into Europe? Can you give us a little bit of color on that, and maybe an update as to how much VAM and acetic you actually do move to Europe from the US?

It's Chris again. Let me give you the high-level picture of what we intended in the way that we put those remarks out there. In, let's call it, a more stable currency environment, we would estimate that a $0.01 movement on the euro is about $0.03 to $0.04 a year for Celanese. But that's the view of how it would work in a stable environment.

When you see this kind of a significant, quick movement in the euro that we have, while that math would imply that the euro change year on year would put you at $0.60 or $0.70 a share, that's kind of the first order effect. You can have second-order effects that offset that. We'll certainly do what we can on pricing to recover some of that. You look at the strength of our Business in Europe, and parts of that are going to be in industries where a lower euro actually helps those export volumes. When we put that number out there, that's really the first-order effect.

Moving on to your question about volumes -- yes, that's a bigger impact today than it would've been before we closed plants in Europe. To paint the picture for you -- I can't walk through the details of volumes product by product; but let's call it maybe a third of this is just the fact that we have business in Europe. So, it's just translation. Probably two-thirds or more of this is revenue-based, and the fact that we're now selling a substantial amount of acetyl products in Europe that are produced in the US. You now have US costs, but euro-based revenues.

Okay, great. No, that's very helpful.

With the second question: The $100 million of raw material relief that was highlighted in the transcript -- is that incorporated in your guidance at this point? It wasn't exactly clear to us if it was or wasn't.

No, I think what we're just talking about there is that we are seeing some step-change. I think, in a full and complete sense, we could be down as much as $300 million in raw materials. A good chunk of that is ethylene; and a good chunk of ethylene remains formulaic, so we wouldn't get any -- it doesn't hurt either way. When we looked at that, we looked at the non-formulaic material base, John, and that's just simply a statement of a view of how big the number could be.

What we will attempt to do is keep it all. What I'd say is that the odds of us doing that are very, very low. We'll work hard to keep as much of that as we can, and work the system to not lose that. I just want to give folks a range of a good guide and theory that's out there that we're going to try to capture part of it.

Great, thanks for the color.

Thanks, John. Drew, let's move to the next question.

The next question comes from PJ Juvekar of Citi. Please go ahead.

Yes, good morning. Thank you for giving us the FX sensitivity at $1.15 to the euro. Are you taking any steps today to protect against any further potential weakening of the euro?

No. PJ, we've debated long and hard about that. Of course, maybe in hindsight we should've done something, but I think practically speaking, our view is that we are not in the hedging business. We do take positions relative to receivables, so we do balance sheet work that sort of minimizes or protects sales that we currently have. But we don't go out beyond the realm of that 60-day period.

Okay. Nothing related to your increased exports, or anything like that?

No.

Okay. When you talked about de-stocking in the acetyl chain in filter tow -- can you talk about geographies? Is there a particular geography where you're seeing pronounced de-stocking relative to others?

Well, I think you're seeing in the -- there are two effects going on in that chain that need to sort themselves out. One is just the general movement of the industry to sort out where the base is -- what's methanol going to be? What's CO going to be? How does that roll through from a production point of view? And customers out there that have their hands out expecting prices to drop.

The de-stocking that I'm talking about really is in a point of view of the consumers who are working their inventory out of their system as quick as they can, and delaying purchases as much as they can. We see that in Asia and in Europe both.

The second effect that is unbelievably hard to quantify is this global trade flow that we're entering into -- the shift in global trade flows theoretically could happen, as we get into the realization of what $50 crude means to the industry. There, you can have different value equations for production in different parts of the world that have changed from where they were, say, a year ago. That's going to impact trade flows. I'll be very honest, PJ, we've not fully sorted that out just yet.

The combination of those things, and the realization of those things, means the folks are -- they're doing everything they can not to buy, and try to delay that a bit. Of course, there's a limit to how much they can do that, but they're trying to go seek and find the best pricing they can find from folks around the world.

Okay. Just to be clear, you said more destocking in Asia and Europe, maybe less in the US?

Yes.

Thank you.

Thanks, PJ. Drew, let's move to the next question.

The next question comes from Frank Mitsch from Wells Fargo Securities. Please go ahead.

Good morning, gentlemen. In the release, you talked about, quote, positive signs in Europe, unquote, especially in auto. I'm just wondering what sort of volume assumptions have you baked into your guidance coming out of Europe? And if you could be a bit more granular in terms of particular areas of strength or weakness?

Yes, I think -- let me talk generally for a second, if I can, Frank. We've had a lot of success growing our penetration in auto over the last several years, to the extent now that we -- for several years, we've enjoyed a growth rate in autos as a multiple of the IHS data growth rate. For instance, last year I think the overall industry grew 3.1%, and our volumes grew about 9% into that industry.

This year, if you believe the data, it would indicate that we are off a bit. I think North America is 2.7%, if my memory serves me; down a bit in Germany. China is like 6% or 7%; and globally we are about 2.3% or so.

We expect auto overall to be down a bit this year, but we're still seeing these trends. So, our actual performance as we start this year in auto is very good. I'd say it's very good, and I'd say it's probably slightly better than it was last year, even though, if you look at the build trends, the EU's probably going to be down 2% in volume this first quarter, year over year.

I don't know if that's really answering it, but we feel good about what's going on there. I think the industry as a whole is moderating its growth just a little bit. Areas like China are a bit worrisome. I think -- you've read all the reports on that. Brazil is pretty worrisome. Brazil's fallen quite steeply.

All right, that's helpful. I know you'd said in the past that you had a $100-million EBIT bridge in 2015 -- some measures. I think it was improving plant operations. You were thinking that that would add like $45 million; supply-chain efficiencies would add about $25 million; and innovation would add about $30 million. I take that all together, $100 million, call it, around $0.50 a share.

And then in the release, you said your productivity actions are $0.15 -- remain on track. Where's the balance of that? Is that on track, and how should we think about that?

When we talked about the $100 million, we were outlining steps that we needed to take to overcome the methanol.

Correct, yes.

I tried to say that in the script. We have done that; that's happening. We believe that with the actions that we've already taken and we're taking, that we'll be able to negate the methanol headwinds on an annualized basis.

Beyond that, we are driving more productivity. The $15 million (sic) is what's immediately in front of us today. We're working to find other things and develop other activities -- or the $0.15. That was above and beyond the numbers we gave last time.

Terrific. Thank you so much.

Yes.

Thanks, Frank. Drew, let's move to the next question.

The next question comes from Cooley May of Macquarie. Please go ahead

Good morning, guys. Could you comment to your raw materials in tow, particularly wood pulp -- your ability to potentially maintain profit spreads in the back half of this year? Also, could this simply be a push-back among your buyers -- just seeing your raw material basket drop -- just holding off on buying, and looking to push price lower?

Yes. The first part -- would you repeat the first part of that, Cooley? I'm not sure I really understood the --

The raw materials setting in acetate tow, particularly wood pulp -- per our data, it looks to be down significantly, and continuing a downward trend. I'm trying to figure out: Is this an industry-wide issue? And where spreads are likely to settle out toward the end of the year? If you're a buyer of wood pulp in Asia, why would you buy here? Why wouldn't you de-stock inventory, press price lower, as much as you can? How can you maintain a profit spread in that setting?

Yes, I think, if I go back to it from a consumption point of view, you cannot even see the price of tow in a cigarette. You can't even see it. From a point of view of a consumer -- and I'm not trying to say consumers don't care about price, but the consumers really are just about indifferent about tow price. They are extremely concerned about tow reliability and availability; ergo, one of the reasons they kept all the inventory that they've kept, Cooley.

I think if you look at it from a point of view of a buyer, a buyer certainly doesn't want to be disadvantaged, on one hand. On the other hand, they just want it there. They want the top quality.

I think we've shared in the past how there's -- all tow is not the same, so there tends to be even some brand alignment around it to make sure the experience is the same from stick to stick. We don't see that from our -- that kind of broad pressure from our customer base. When they fuss at us, they fuss at us about reliability and making sure we've got the volume to provide them.

If you look of the cost side, there has been some reductions in wood pulp that's flowing through the industry. There may be some fringe buyers out there, so non-majors that are using that, as you've said, to try to put some pressure back on whoever their suppliers are. But I don't think -- I guess I was going to say: I don't think that's a trend. I don't think that in itself foretells a collapse of a business model, and I don't think it's necessarily sustainable.

Thanks.

Thank you, Cooley. Let's move to the next question, Drew.

The next question comes from Kevin McCarthy, Bank of America Merrill Lynch. Please go ahead.

Yes, good morning. Mark, can you speak to the nexus between the collapse in crude oil and your future capital deployment plans? For example, I think you've been exploring a second methanol buildout at Bishop. Just wondering if the change in the energy backdrop alters your willingness to stay short some methanol, as an example?

I think in that one, we're certainly really reviewing options with some of the partners we've been working with for that investment. Kevin, we haven't made a decision today on that.

I think you've seen methanol prices really move dramatically, particularly in Asia. The Asian dynamic, from my personal view, needs to sort out just a little bit, especially the role that MTO is going to play in the consumption of methanol there. I think from that then, you can back up and get a better sense of what the economics and value equation looks like to produce in the US. I'd say that investment is still under consideration, as well.

If I look beyond that, lower -- if you bake in $50, and say we're $50 forever, that challenges fuel ethanol more. We've been doing more work, of course, with all of our partners in China and in Indonesia and in India. There continues to be a lot of engagement and debate and discussion in that. But I would say that, on the surface, Indonesian economics are not quite as strong as they were, in part because the government has moved away from subsidies of fuel. There, the government bogey is not quite as high as it was. There's still a positive return on it, but it's not as good as it was.

I think if you look at other fuel sources that are out there that move in concert with oil, it still remains a very attractive project. As we go through this year, I think we'll sort out -- we'll have a better view of the longevity of crude pricing at these levels. I think that could have an impact on future plans for ethanol.

Great, that's helpful.

Second question, if I may, on the financial side: I think you mentioned in the prepared remarks release last night that you expect your tax rate to dip below 20% in 2015. I was wondering if you could speak to what is driving that? And on the balance sheet side, what an appropriate leverage ratio might be? I think you had indicated some de-leveraging in the near future. How close are you getting to your target leverage here?

I'll talk about the tax rate first. We didn't give a pinpoint number, just with some of the uncertainty. The geographic shifts of profitability can change that further. But directionally, the reason it's going down is through some of this work we're doing with our pan-European headquarters in the Netherlands. In connection with that, it's changing some of the product flows in the Company to a more favorable tax jurisdiction. That's really the biggest part of driving that change on into 2015.

The second part of your question on leverage: We've never really put out specific leverage targets. But what we have said is we do want to continue to strengthen the balance sheet of the Company. I think if you look back at the past three years at what we've been doing, it demonstrates that commitment. I'll take that in a couple of buckets. One is debt level; so, we paid down about $230 million of debt, and most of that was in this last fourth quarter.

If you look at -- another form of de-leveraging is dealing with the underfunding in our pension plans. Both at the end of 2012 and at the end of 2014, we made incremental contributions of $100 million in each of those years to bring that obligation down.

At the same time, I think you're aware that we had embarked on the termination of our retiree medical plan, which is consistent with what we've seen other companies do. In the end, we funded about $70 million into that, but it reduced the liability by a couple hundred million dollars -- just the way we structured that buyout.

I'm pleased to tell you that this past quarter there was another step, back on the pension side; so, there's a population of employees within that pension obligation that are former employees who have moved on to other companies, but we remain with an obligation to fund some level of pension for them. We made an offer to those employees to buy them out, and succeeded in getting a group of them to accept that offer, which, on a gross basis, reduces that pension liability by over $200 million, in exchange for about $150 million that came out of the plan. It didn't come out of the cash that you see on our balance sheet, but rather came out of the plan. But again, it's another form of working that obligation down, and working on de-leveraging. I think in future periods you'll see us continuing to work that down as part of the overall strategy for cash deployment.

Thank you very much.

Thanks, Kevin. Drew, let's move to the next question.

The next question comes from Bob Koort of Goldman Sachs.

You guys have been making some reasonable progress on VAE and other ethylene-based products. I'm wondering, in light of the propylene chain falling apart, if you're going to suffer maybe some competitive substitution push-back there going forward? What are your thoughts on that?

Yes, there are some. Bob, that's exactly right. There's some areas where we are seeing that. But European Asia seems to be very -- remains very committed to some of the virtues, especially in the coatings arena, for those molecules. So, we're seeing still strong growth there. We're still moving ahead with our expansion in Asia -- build a new VAE plant.

Mark, I guess maybe to get away from the near-term stuff, you've been there I think a little over three years now. I think when you came in, there was a desire to drive towards a more specialty-oriented platform. I just wondered if you might assess where you are in that evolution, because it sure seems like the market's not giving you any credit for it. You've got a trading multiple that looks more like a pure-play commodity stock.

You mentioned in your remarks that you wouldn't be able to hold on to much raw material relief, which might imply you haven't high-graded the portfolio, or maybe your products are more susceptible to some price dislocation. Can you tell us where you are in that journey, and what you might have to do to get a rating more appropriate for where you think the portfolio sits?

Yes. Boy, that's a great question, Bob. When we approached this, starting in 2012, doing a real deep dive into our businesses, we really concluded that we had two core capabilities. One was around the materials segment, which is about half the portfolio. If you look at the businesses we have there, all the molecules we have and the chemistries we have, there's a real push to marry chemistry and application to drive that. We've had tremendous success. If you draw a circle around engine materials and consumer, which is also material, you'll see really strong growth through that period of time.

On the other side, which is technology, and technology leverage, we really felt that we weren't given our chance to leverage that. I'd venture to say, in 2012, virtually our entire contractual relationships that we had, the entire list of those contractual relationships with customers did not give us the ability to freely negotiate and freely draw pricing. We've been working hard to change that, and we've had good success changing that in parts of the world. But I'd still say we are only about a third of the way there, Bob.

Part of the ability that you saw last year of Celanese driving value and the industry driving value is that we changed our approach to that industry, and conducted ourselves, to be very honest, more like a specialty chemical company. We conducted ourselves with real-time value and real-time pricing.

I feel that, from a point of view of commerce, we are conducting ourselves in a way that's going to reduce our volatility over time, and give us much more consistent earnings growth. We've targeted earnings growth double-digit CAGR, 12% CAGR, over like a five-year period. Maintaining that is what's most important to me. I think, in my world, that's a reflection of really conducting yourself as if it was specialty. We've not been recognized yet for that, but I'm quite confident we will as time goes on.

The last thing I'll mention is, as we roll out internally our new strategy, and we're looking about new strategy, the updated version of our strategy, looking forward to 2018, it's very apparent to all of us that we need to bring in more businesses in the portfolio. M&A is taking more of a front-and-center effort for us to further build the chain, if you will, both on the C1 side and also engine material side, in a way that we can further differentiate ourselves with customers and values that would go back to shareholders.

Got it, thanks.

Thank you.

Thanks, Bob. Drew, let's move to the next question.

The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.

Could you just give us a sense of what the machinations are that allow 1Q to be flat year over year? Maybe talk through the headwinds in the quarter, and how the different segments should perform?

You were breaking up a lot there, Vincent.

I'm sorry. I was trying to understand how first-quarter 2015 is going to be consistent with the first quarter of 2014? I assume there are going to be puts and takes between the different segments year over year, given the headwinds. I was just hoping you could help us reconcile that as we update our models?

Yes, I think -- whether it's a -- I think as we enter 2015, we're talking about 2015 earnings as we look at it here, in the bottom-line basis, we think it's going to be fairly consistent what we did in the first quarter of 2014. We're expecting, if I can talk about that some -- we're expecting stronger performance in a lot of the businesses, like the acetic acid chain and derivatives, [acetyl] chain, engine materials businesses.

That will be offset by cellulosics, which we've talked about in the big inventory hit that's going to occur. A lot of that occurs in the first quarter. That's how we come to that balance number. Should get a little favorability in tax rate, as Chris mentioned, that will help a bit in there, as well. The net of all those things, you come out about flat.

Okay. And just as a follow-up, you mentioned that M&A is becoming more front and center in your strategic discussions. Do you also talk about the other side of that, which would be potentially selling things or making the overall structure of the Company different? There's obviously across the chemicals industry, there is a lot of debate at many different, more conglomerate-oriented companies about pure play or the conglomerate structure, or what have you. You're obviously in a variety of different things. Do you look at your portfolio on the sum-of-the-parts basis? Do you have any thoughts about -- is it definitely that you're going to be adding versus is there any opportunity to subtract or to make things different?

No, there are opportunities. We've actually attempted some of those, and really felt, from a value equation point of view, it wasn't the right thing to do at the time to take that step. You shouldn't have a view that we're locked into only one portfolio.

What I will say is that these two cores, when you look at it from a two-core perspective, and you set aside the chemistry portfolio of individual businesses, there is a lot of combined strength there. We feel good about the two cores, but clearly there are pieces of those that, at some point in time, may better fit somewhere else, and we would be fine with that.

Okay, thank you very much.

Thanks, Vincent. Drew, let's move to the next question. We'll have this be the last series of questions.

That question will come from Jeff Zekauskas of JPMorgan. Please go ahead.

Thanks very much. Celanese buys quite a lot of ethylene. My guess is something over a billion pounds. Is that the right number? How much of that comes under formulaic pricing, and how much of it doesn't?

That number is -- generically, it's in the right range. I will just say that. It's in the right range of -- all of our buys are formulaic.

Okay.

We don't really buy on the spot market, if that's what you're asking.

No, what I meant is that obviously ethylene prices have come down quite a lot. I would think there would be some kind of tailwind you would experience, at least in the beginning of the year.

I think there's some areas where those molecules go into specialty products, right? That creates in itself an opportunity for us. There are other areas where they go into conventional products where that formula in our customer base gets kind of passed through, if that makes sense.

Sure.

The ethylene benefit that's going to roll to us as we go through this year, a chunk of it we, in effect, don't see because our customers' base business has a tie back to that molecule.

Okay, and then for my follow-up, I would think [ibencina] might have a tough year this year. When you size what the equity contribution might be, do you size it down 50%, or 30%, or some number like that? Or do you not size it?

No, we do size that. As you know, ibencina, effectively the way that business works is basically it's MTBE sale, and MTBE has a reasonable correlation to crude. We do expect and our partners expect that the net back to that venture is going to go down. We've sized that in the range of $0.15 to $0.20 potentially. That would be a full-year perspective on it.

Jeff, another thing to keep in mind on that one: We're picking up their numbers on a quarter lag. So, just bear that in mind.

Ah, yes.

You'll start seeing it in the second quarter, whatever is going on.

All right, thank you so much.

Thank you, Jeff.

Thanks, Jeff, and thanks everybody else on the call today. We'll be around for follow-ups later today. Have a great Friday.

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