Celanese debt trend
At the end of the second quarter of 2018, Celanese (CE) reported debt of ~$.3.6 billion. Its debt remained stable at ~$3 billion between 2012 and 2016. However, at the end of 2017, Celanese raised 300 million euros to fund its qualified US pension plans. As a result, CE’s debt is at its highest level in more than six years.
Since 2012, CE’s debt has grown at a CAGR (compound annual growth rate) of 2.75%. Although that debt growth rate is nominal, we’ll see how it has impacted CE’s DE (debt-to-equity) ratio.
Celanese’s debt-to-equity ratio
The latest report from the second quarter of 2018 indicates that Celanese’s DE ratio was 1.06x, which is marginally higher than the industry average of 0.98x. In comparison, its peers LyondellBasell (LYB), Westlake Chemical (WLK), and Eastman Chemical (EMN) have DE ratios of 0.81x, 0.50x, and 1.2x, respectively. That indicates that Celanese has the highest DE ratio among its peers with the exception of Eastman Chemical.
Although Celanese’s DE ratio is marginally above the industry standard, it may not bother investors much. However, we should see whether Celanese can service its debts easily.
In the next part, we’ll look at Celanese’s free cash flows and its ability to service its debt.
Investors can indirectly hold Celanese by investing in the Invesco DWA Basic Materials Momentum ETF (PYZ), which has invested 2.9% of its portfolio in Celanese.