Celanese Corporation CE recently announced that its fully-owned subsidiary, Celanese (Nanjing) Chemical Co. Ltd., has inked a tri-party deal with Chengdu, China-based Southwest Institute of Chemical Co., Ltd. (SWCHEM) and Teng Zhou, China-based Yankuang Lunan Chemical Co., Ltd. (LUNAN) to build a Pilot Scale-up Unit (PSU) in Teng Zhou.
The PSU will test the industrial scale production of acrylic acid by using acetic acid as primary raw material. Financial details of the agreement have not been disclosed by the company.
Notably, SWCHEM has been working with Celanese since 2008. They are jointly developing an innovative technology to produce acrylic acid with the process of acetic acid formaldehyde condensation, which is based on Celanese’s original proprietary research.
Per the agreement, LUNAN will build an industrial scale PSU facility to complete commercial production trials. The latest agreement marks the expansion of the cooperation into value chain of the acetyls industry. Moreover, the successful commercialization of this technology is expected to promote organic growth of the acetic acid industry.
Celanese’s shares have lost 7.8% in the past year against its industry’s 42.8% rise.
In first-quarter 2020 earnings call, the company stated that it expects to generate $300-$400 million of incremental cash from productivity actions being undertaken along with working capital management and capital expenditure prioritization. This will enable the company to offset challenges related to demand and earnings in 2020.
The company also suspended its earlier announced annual adjusted earnings per share guidance for 2020 due to uncertainties regarding the duration and impacts of the coronavirus pandemic.
Zacks Rank & Key Picks
Celanese currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Royal Gold, Inc. RGLD and Franco-Nevada Corporation FNV. While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), Royal Gold and Franco-Nevada carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Agnico Eagle has an expected earnings growth rate of 75.3% for 2020. The company’s shares have surged 42% in the past year.
Royal Gold has an expected earnings growth rate of 67.6% for fiscal 2020. Its shares have returned 50.5% in the past year.
Franco-Nevada has an expected earnings growth rate of 20.3% for 2020. The company’s shares have surged 79.3% in the past year.
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