Celanese sees chip shortages affecting business, few recession fears

By Devika Patel

Knoxville, Tenn., July 29 – Celanese Corp. does not expect much impact on its business should a recession occur next year, but the company’s auto segment is being affected by chip shortages, which should decrease incrementally through year-end 2023.

“Although we may be in a recessionary environment next year, personally, I think it will be more shallow and the impact on our business, while we’re not immune to it, we think is, at this point, manageable,” chairman and chief executive officer Lori J. Ryerkerk said on the company’s second quarter ended June 30 earnings conference call on Friday.

Signs of inflation and energy uncertainty are apparent, but the company’s auto segment is being driven primarily by chip shortages, which are expected to ease gradually through the end of 2023.

“In the E.U., I’d say we’re seeing some signs that inflation and energy uncertainty is starting to impact demand but fairly weak signals this point,” Ryerkerk said.

“If you look at the different end markets, in auto, what I would say is, right now it’s pretty hard for us to imagine a scenario where demand is what’s going to drive auto.

“We really think it’s going to continue to be driven by availability of raw materials, specifically chips, and our outlook is chip availability gets slightly better every quarter and will continue to do so through the end of 2023 and we believe demand is pretty robust.

“We’re seeing that in all segments of the world, big backlogs, low inventories,” she said.

On July 7, company subsidiary Celanese US Holdings LLC priced $7.5 billion of fixed-rate senior notes (Baa3/BBB/BBB-) in five tranches.

The offering was upsized from initial expectations in the $3 billion to $4 billion area.

The company priced $2 billion of 5.9% notes due July 5, 2024 at 99.987 to yield 5.908%, or a spread over Treasuries of 287.5 basis points. Price talk was in the Treasuries plus 312.5 bps area.

The issuer priced $1.75 billion of 6.05% notes due March 15, 2025 at 99.993 to yield 6.057%, or a spread over Treasuries of 300 bps versus talk in the 325 bps area.

The company sold $2 billion of 6.165% notes due July 15, 2027 at par to yield 6.165%, or a spread over Treasuries of 312.5 bps. Spread talk was in the 337.5 bps area.

Celanese sold $750 million 6.33% notes due July 15, 2029 at par with a spread over Treasuries of 325 bps versus talk in the 350 bps area.

Finally, Celanese priced $1 billion of 6.379% notes due July 15, 2032 at par and a spread over Treasuries of 337.5 bps compared to talk in the Treasuries plus 362.5 bps area.

Proceeds were earmarked, with cash on hand and revolver borrowings, to fund the company’s planned acquisition of the majority of the Mobility & Materials business of DuPont de Nemours, Inc.

BofA Securities Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC were the bookrunners.

Celanese is a Dallas-based chemicals company.

© 2015 Prospect News.
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