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<SEC-DOCUMENT>0000950123-01-002601.txt : 20010326
<SEC-HEADER>0000950123-01-002601.hdr.sgml : 20010326
ACCESSION NUMBER: 0000950123-01-002601
CONFORMED SUBMISSION TYPE: 20-F
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010323
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CELANESE AG
CENTRAL INDEX KEY: 0001095442
STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, FOIL & COATED PAPER BAGS [2673]
IRS NUMBER: 000000000
STATE OF INCORPORATION: I8
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 20-F
SEC ACT:
SEC FILE NUMBER: 001-15419
FILM NUMBER: 1578110
BUSINESS ADDRESS:
STREET 1: INSUSTRIEPARK HOECHST BUILDING F-821 D-6
STREET 2: FRANKFURT AM MAIN GERMANY
CITY: FRANKFURT
BUSINESS PHONE: 6930514000
MAIL ADDRESS:
STREET 1: INDUSTRIEPARK HOECHST BLDG F-821 D-65926
STREET 2: FRANKFURT AM MAIN GERMANY
CITY: FRANKFURT
STATE: I8
</SEC-HEADER>
<DOCUMENT>
<TYPE>20-F
<SEQUENCE>1
<FILENAME>y46464e20-f.txt
<DESCRIPTION>CELANESE AG
<TEXT>
<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NUMBER 1-15419
CELANESE AG
(Exact name of Registrant as specified in its charter)
CELANESE CORPORATION
(Translation of Registrant's name into English)
FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)
61476 KRONBERG/TAUNUS, GERMANY
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Ordinary Shares with no par value New York Stock Exchange
</TABLE>
------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
------------------------
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
NONE
(Title of Class)
------------------------
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the Annual
Report:
Ordinary Shares with no par value...........................50,326,355
(as of December 31, 2000)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
<TABLE>
<S> <C>
Yes [X] No [ ]
</TABLE>
Indicate by check mark which financial statement item the registrant has
elected to follow.
<TABLE>
<S> <C>
Item 17 [ ] Item 18 [X]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Identity of Directors, Senior Management and
Advisers.................................................. 2
Item 2. Offer Statistics and Expected Timetable............. 2
Item 3. Key Information..................................... 2
Selected Financial Data................................... 2
Exchange Rate Information................................. 4
Risk Factors.............................................. 5
Item 4. Information on the Company.......................... 9
Introduction.............................................. 9
History and Development of the Company.................... 9
Business Summary.......................................... 10
Segment Overview.......................................... 11
Strategy.................................................. 12
Business Segments......................................... 14
Other Activities.......................................... 27
Acquisitions and Divestitures............................. 27
eBusiness................................................. 28
Raw Materials and Energy.................................. 29
Research and Development.................................. 29
Intellectual Property..................................... 30
Environmental and Other Regulation........................ 31
Organizational Structure.................................. 33
Description of Property................................... 33
Item 5. Operating and Financial Review and Prospects........ 37
Basis of Presentation..................................... 37
Major Events in 2000...................................... 38
Condensed Consolidated Statements of Operations........... 39
Overview -- 2000 Compared with 1999....................... 39
Selected Data by Business Segment......................... 40
Summary by Business Segment -- 2000 Compared with 1999.... 41
Summary of Consolidated Results -- 2000 Compared with
1999.................................................... 44
Summary by Business Segment -- 1999 Compared with 1998.... 48
Summary of Consolidated Results -- 1999 Compared with
1998.................................................... 50
Liquidity and Capital Resources........................... 53
Environmental Matters..................................... 55
Market Risks.............................................. 55
Introduction of the Euro.................................. 56
New Accounting Standards.................................. 56
Outlook................................................... 57
Item 6. Directors, Senior Management and Employees.......... 59
Directors and Senior Management........................... 59
Compensation of Directors and Officers.................... 61
Incentive Plans........................................... 62
Board Practices........................................... 63
Employees................................................. 66
Share Ownership........................................... 66
Item 7. Major Shareholders and Related Party Transactions... 67
Major Shareholders........................................ 67
Related Party Transactions................................ 67
Item 8. Financial Information............................... 68
Consolidated Financial Statements and Other Financial
Information............................................. 68
Export Sales.............................................. 68
Legal Proceedings......................................... 68
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Dividend Policy........................................... 71
Significant Changes....................................... 72
Item 9. The Offer and Listing............................... 72
Nature of Trading Market.................................. 72
Trading on the Frankfurt Stock Exchange................... 72
Trading on the New York Stock Exchange.................... 73
Item 10. Additional Information............................. 74
Articles of Association................................... 74
Material Contracts........................................ 78
Exchange Controls and Other Limitations Affecting Security
Holders................................................. 79
Taxation.................................................. 79
United States Information Reporting and Backup
Withholding............................................. 82
Item 11. Quantitative and Qualitative Disclosures About
Market Risk............................................... 82
Interest-Rate Risk Management............................. 82
Foreign-Exchange Risk Management.......................... 84
Commodity Risk Management................................. 84
Other Financial Instruments............................... 85
Item 12. Description of Securities Other Than Equity
Securities................................................ 85
<CAPTION>
PART II
<S> <C>
Item 13. Defaults, Dividend Arrearages and Delinquencies.... 85
Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds............................... 85
Item 15. Reserved........................................... 85
Item 16. Reserved........................................... 85
<CAPTION>
PART III
<S> <C>
Item 17. Financial Statements............................... 85
Item 18. Financial Statements............................... 85
Item 19. Exhibits........................................... 85
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------
ii
<PAGE> 4
INTRODUCTION
Celanese AG is incorporated as a stock corporation organized under the laws
of the Federal Republic of Germany. As used in this Annual Report, "Celanese"
refers to Celanese AG, its consolidated subsidiaries and, except for accounting
purposes, its non-consolidated affiliates. For accounting purposes, "Celanese"
refers solely to Celanese AG and its consolidated affiliates. See Note 1 to the
Consolidated Financial Statements for Celanese contained in this Annual Report
(the "Consolidated Financial Statements").
------------------------
BASIS OF PRESENTATION
The Consolidated Financial Statements were prepared in accordance with U.S.
Generally Accepted Accounting Principles ("U.S. GAAP") for all periods
presented. The Consolidated Financial Statements reflect, for the periods
indicated, the financial condition, results of operations and cash flows of the
businesses transferred to Celanese from Hoechst Aktiengesellschaft, also
referred to as Hoechst, in a demerger that became effective on October 22, 1999.
The Consolidated Financial Statements and other financial information included
in this Annual Report, unless otherwise specified, have been presented to
exclude the effects of discontinued operations. The Consolidated Financial
Statements, for the periods prior to the effective date of the demerger from
Hoechst, assume that Celanese had existed as a separate legal entity with five
business segments, Acetyl Products, Chemical Intermediates, Acetate Products,
Technical Polymers Ticona and Performance Products, as well as the other
businesses and activities of Hoechst transferred to Celanese in the demerger.
The financial results of Celanese, prior to the effective date of the demerger,
have been carved out from the consolidated financial statements of Hoechst using
the historical results of operations and assets and liabilities of these
businesses and activities and reflect the accounting policies adopted by Hoechst
in the preparation of its financial statements and thus do not necessarily
reflect the accounting policies which Celanese might have adopted had it been an
independent company during those periods.
CURRENCY TRANSLATION
Effective January 1, 1999, Germany and 10 other member states of the
European Union introduced the euro or E as their common currency and established
fixed conversion rates between their existing sovereign currencies and the euro.
The Consolidated Financial Statements for each period presented on or before
December 31, 1998 have been prepared using the Deutsche Mark or DM and have been
restated into euro using the official fixed conversion rate between the euro and
the Deutsche Mark of DM 1.95583 per E1.00. Celanese does not represent that
these restated euro amounts for periods ended on or before December 31, 1998,
actually represent the DM amounts in the Consolidated Financial Statements as
prepared or could be converted into DM at the rate indicated. Since January 1,
1999, Celanese's Consolidated Financial Statements have been prepared in euro
and are no longer restated from Deutsche Mark into euro. U.S. dollar or U.S.$
amounts are unaudited and have been converted solely for convenience of the
readers for 2000 from euro into U.S. dollars, at an exchange rate of U.S.$0.9388
per E1.00, the noon buying rate in the City of New York for cable transfers in
foreign currencies announced by the Federal Reserve Bank of New York for customs
purposes (the "Noon Buying Rate") on December 29, 2000. For information
regarding recent rates of exchange between euro and U.S. dollar, see "Item 3.
Key Information-Exchange Rate Information." Celanese does not represent that the
U.S. dollar amounts presented in the U.S. dollar convenience translation or any
amounts translated from euro into other currencies could have been converted
from euro at the rates indicated.
On March 16, 2001, the Noon Buying Rate for the euro was U.S.$.0.8929 per
E1.00.
------------------------
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Investors are cautioned that the forward-looking statements contained in
this Annual Report involve both risk and uncertainty. Several important factors
could cause actual results to differ materially from those anticipated by these
statements. Many of these statements are macroeconomic in nature and are,
therefore, beyond the control of management. See "Forward-Looking Statements May
Prove Inaccurate" in "Item 5. Operating and Financial Review and Prospects".
<PAGE> 5
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
SELECTED FINANCIAL DATA
The following table presents selected consolidated financial information of
Celanese. You should read this table in conjunction with "Item 5. Operating and
Financial Review and Prospects," the audited Consolidated Financial Statements
and the notes to those statements that are included elsewhere in this Annual
Report.
The balance sheet data set forth below for 2000 and 1999, and the statement
of operations data for 2000, 1999 and 1998, all of which are set forth below,
are derived from the audited Consolidated Financial Statements included
elsewhere in this Annual Report and should be read in conjunction with those
financial statements and the notes thereto. The balance sheet for 1998 and the
statement of operations and balance sheet data for 1997 are derived from audited
Consolidated Financial Statements not included in this Annual Report. The
statement of operations and balance sheet data for 1996 are derived from
unaudited Consolidated Financial Statements not included in this Annual Report.
The selected financial data for 1996 have been prepared on a basis consistent
with that of the audited Consolidated Financial Statements and, in the opinion
of Celanese's management, include all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation.
Effective January 1, 1999, Germany and 10 other member states of the
European Union introduced the euro as their common currency and established
fixed conversion rates between their existing sovereign currencies and the euro.
The Consolidated Financial Statements for each period presented on or before
December 31, 1998 have been prepared using the Deutsche Mark and have been
restated in euro using the official fixed conversion rate between the euro and
the Deutsche Mark of DM 1.95583 per E1.00. Accordingly, the Consolidated
Financial Statements for all periods prior to December 31, 1998 depict the same
trends that would have been presented had they been presented using the Deutsche
Mark. Because the consolidated financial information for those periods was
originally prepared using the Deutsche Mark, it is not necessarily comparable to
financial statements of other companies which originally prepared financial
statements in a European currency other than the Deutsche Mark and subsequently
converted that other currency into euro. Beginning January 1, 1999, Celanese's
Consolidated Financial Statements have been prepared in euro and are no longer
restated from Deutsche Mark into euro.
2
<PAGE> 6
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2000 2000 1999 1998 1997 1996
------------- -------- -------- -------- -------- -------------
(UNAUDITED) (AUDITED) (UNAUDITED)
------------- ----------------------------------------- -------------
U.S. $ E E E E E
------------- -------- -------- -------- -------- -------------
(IN MILLIONS, EXCEPT PER SHARE DATA, PERCENTAGES AND NUMBER OF EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... 4,888 5,207 4,318 4,344 4,951 4,325
Cost of sales....................... (4,170) (4,441) (3,621) (3,454) (3,862) (3,392)
Gross profit........................ 718 766 697 890 1,089 933
Selling, general and administrative
expenses.......................... (532) (567) (570) (535) (575) (329)
Research and development expenses... (88) (94) (79) (101) (133) (128)
Special charges(1).................. (27) (29) (559) (100) (103) (119)
Operating profit (loss)(2).......... 78 83 (521) 168 267 347
Interest and other income, net(3)... (52) (56) 71 75 83 93
Income tax benefit (expense)........ (79) (84) 83 (109) (83) (148)
Minority interests.................. -- -- 7 (40) (63) (61)
Earnings (loss) from continuing
operations........................ 51 55 (502) (56) 38 46
Earnings (loss) from discontinued
operations........................ 3 3 310 12 9 (128)
Net earnings (loss)................. 54 58 (207) (44) 47 (82)
Earnings (loss) per common share --
basic and diluted(4).............. 1.01 1.09 (3.70) (0.79) 0.84 (1.47)
BALANCE SHEET DATA:
Total assets........................ 7,174 7,642 7,569 7,358 6,185 5,657
Debt................................ 1,094 1,165 948 1,479 1,888 1,903
Shareholders' equity(5)............. 2,669 2,843 2,866 2,736 1,250 1,024
Dividends paid per share(6)......... .11 .11 -- -- -- --
Common stock........................ 134 143 143 -- -- --
Weighted average shares -- basic and
diluted........................... 53,293 53,293 55,915 55,915 55,915 55,915
OTHER DATA:
Operating margin (%)................ 1.60 1.59 (12.07) 3.87 5.39 8.02
Depreciation and amortization of
tangible and intangible assets.... 364 388 339 312 290 195
Capital expenditures on tangible
fixed assets...................... 221 235 262 345 368 338
Number of employees on a continuing
basis (end of period) in
thousands......................... 13.2 13.2 14.9 15.8 17.5 17.9
</TABLE>
- ---------------
(1) Special charges represent charges for the impairment of fixed assets,
litigation charges and restructuring charges, which include employee
termination costs, plant and office closures and other costs. See Note 25 to
the Consolidated Financial Statements.
(2) Hoechst acquired substantially all the 49 percent minority interest in its
Mexican subsidiary, Grupo Celanese, in December 1998, and contributed it to
Celanese. If this minority interest had been contributed to Celanese as of
January 1, 1998, Celanese's operating profit for 1998 would have been
reduced by E30 million, because of the amortization of goodwill associated
with the acquisition. See Note 4 to the Consolidated Financial Statements.
(3) Interest and other income, net, represents equity in net earnings of
affiliates, interest expense, and interest and other income, net, as set
forth in the Consolidated Financial Statements.
(4) Earnings (loss) per common share -- basic and diluted is calculated by
dividing net earnings (loss) by the weighted average shares outstanding. At
December 31, 2000, Celanese did not have any dilutive common stock
equivalents. On the effective date of the demerger, Hoechst issued
55,915,369 shares of Celanese to existing Hoechst shareholders; these shares
are deemed to be outstanding for 1999 and all prior periods presented.
(5) Shareholders' equity increased significantly from 1997 to 1998 and reflects
the contribution of net assets to Celanese by Hoechst prior to the demerger.
The principal factors for this increase are the contribution of the minority
interest in Grupo Celanese of E592 million, the contribution of Hoechst
receivables amounting to E384 million, the transfer of some other activities
from Celanese to Hoechst of E350 million and the recognition of a deferred
tax asset in connection with the contribution of the Dyneon equity
investment of E109 million. Dyneon was a joint venture with 3M in which
Celanese had a 46 percent interest. In December 1999, Celanese sold its
interest in Dyneon to 3M. See Note 4 to the Consolidated Financial
Statements.
(6) Dividends paid in 2000 relate to dividends approved at Celanese's 2000
Annual General Meeting of Shareholders held in May 2000.
3
<PAGE> 7
EXCHANGE RATE INFORMATION
Effective January 1, 1999, Germany and 10 other member states of the
European Union introduced the euro as their common currency and established
fixed conversion rates between their existing sovereign currencies and the euro.
Currency exchanges traded the euro beginning on January 4, 1999. Beginning on
January 1, 2002, the euro will be the official currency of all euro zone
countries. There will be a transition period ending July 1, 2002 during which
the local currencies of participating countries may still be used alongside the
euro.
Celanese began using the euro as its reporting currency on January 1, 1999
and pays dividends on its shares in euro. Furthermore, prices quoted for the
Celanese shares on the Frankfurt Stock Exchange are quoted in euro.
Fluctuations in the exchange rate between the euro and the U.S.$ will
affect:
- The U.S.$ equivalent for dividends received by U.S. holders of Celanese
shares; and
- The trading market price of the Celanese shares on the Frankfurt and New
York Stock Exchanges.
The table below sets forth the Noon Buying Rates for the Deutsche Mark
versus the U.S.$, restated in euro for all periods prior to January 1, 1999,
and, for all subsequent periods, sets forth the Noon Buying Rates for the euro
in U.S.$. For the calculation of the euro amounts for all periods prior to
December 31, 1998, Celanese has restated the applicable Noon Buying Rate for the
DM per U.S.$ into euro at the official fixed DM/euro conversion rate of DM
1.95583 per E1.00. This restatement matches the restatement into euro of the
Consolidated Financial Statements, which, for all periods prior to January 1,
1999, were prepared in Deutsche Mark and restated into euro. Celanese does not
represent that the U.S.$ amounts referred to below could have been or could be
converted into euro at any particular rate indicated. The average amounts set
forth below under "Average" are calculated as the average of the Noon Buying
Rates on the last business day of each month.
<TABLE>
<CAPTION>
YEAR LOW HIGH AVERAGE END
- ---- ------ ------ ------- ------
<S> <C> <C> <C> <C>
1996................................. 1.2493 1.3626 1.2978 1.2711
1997................................. 1.0398 1.2689 1.1244 1.0871
1998................................. 1.0548 1.2178 1.1115 1.1733
1999................................. 1.0080 1.1825 1.0660 1.0046
2000
July............................... 0.9237 0.9548 0.9386 0.9266
August............................. 0.8878 0.9228 0.9045 0.8878
September.......................... 0.8462 0.8993 0.8695 0.8837
October............................ 0.8270 0.8806 0.8525 0.8486
November........................... 0.8382 0.8694 0.8551 0.8694
December........................... 0.8765 0.9388 0.3898 0.9388
2001
January............................ 0.9181 0.9535 0.9376 0.9308
February........................... 0.9057 0.9395 0.9205 0.9212
March (through March 16, 2001)..... 0.8929 0.9340 0.9222 0.8929
</TABLE>
For a more complete discussion of exchange rate fluctuations and the
hedging techniques used by Celanese to manage its exposure to these
fluctuations, please see "Risk Factors" set forth below and "Item 5. Operating
and Financial Review and Prospects -- Market Risks" and "Item 11. Quantitative
and Qualitative Disclosures About Market Risk".
4
<PAGE> 8
RISK FACTORS
Many factors could have an effect on Celanese's financial condition, cash
flows and results of operations. Celanese is subject to various risks resulting
from changing economic, environmental, political, industry, business and
financial conditions. The principal factors are described below.
CELANESE IS AN INTERNATIONAL COMPANY AND IS EXPOSED TO GENERAL ECONOMIC AND
POLITICAL CONDITIONS AND RISKS IN THE COUNTRIES IN WHICH IT HAS SIGNIFICANT
OPERATIONS
Celanese operates in the global market and has customers in many countries.
Celanese has major facilities located throughout North America, Europe and the
Pacific Rim, including facilities in China, Japan, Korea and Saudi Arabia
operated through joint ventures. Its principal customers are similarly global in
scope, and the prices of its most significant products are typically world
market prices. Consequently, Celanese's business and financial results are
affected directly and indirectly by world economic and political conditions.
CYCLICALITY IN THE INDUSTRIAL CHEMICALS INDUSTRY HAS IN THE PAST AND MAY IN THE
FUTURE RESULT IN REDUCED OPERATING MARGINS OR OPERATING LOSSES
Consumption of the basic chemicals that Celanese manufactures, in
particular those in acetyl and acrylic products, such as methanol, formaldehyde,
acetic acid, vinyl acetate monomer, and acrylic acid, has increased
significantly over the past 30 years. Despite this growth in consumption,
producers have experienced alternating periods of inadequate capacity and excess
capacity for these products. Periods of inadequate capacity, including some due
to raw material shortages, have usually resulted in increased selling prices and
operating margins. This has often been followed by periods of capacity
additions, which have resulted in declining capacity utilization rates, selling
prices and operating margins.
Celanese expects that these cyclical trends in selling prices and operating
margins relating to capacity shortfalls and additions will likely persist in the
future, principally due to the continuing combined impact of five factors:
- Significant capacity additions, whether through plant expansion or
construction, can take two to three years to come on stream and are
therefore necessarily based upon estimates of future demand.
- When demand is rising, competition to build new capacity may be
heightened because new capacity tends to be more profitable, with a
lower marginal cost of production. This tends to amplify upswings in
capacity.
- When demand is falling, the high fixed cost structure of the capital
intensive chemicals industry leads producers to compete aggressively on
price in order to maximize capacity utilization.
- As competition in these products is focused on price, being a low-cost
producer is critical to profitability. This favors the construction of
larger plants, which maximize economies of scale, but which also lead to
major increases in capacity which can outstrip current growth in demand.
- Cyclical trends in general business and economic activity produce swings
in demand for chemicals.
Celanese believes that the basic chemicals industry, particularly in the
commodity chemicals manufactured by Celanese's Acetyl Products and Chemical
Intermediates segments, is currently characterized by overcapacity, and that
there may be further capacity additions in the next few years.
THE LENGTH AND DEPTH OF PRODUCT AND INDUSTRY BUSINESS CYCLES OF CELANESE'S
MARKETS, PARTICULARLY IN THE AUTOMOTIVE, ELECTRICAL, CONSTRUCTION AND TEXTILE
INDUSTRIES, MAY RESULT IN REDUCED OPERATING MARGINS OR OPERATING LOSSES
Some of the markets in which Celanese's customers participate, such as the
automotive, electrical, construction and textile industries, are cyclical in
nature, thus posing a risk to Celanese which is beyond its control. These
markets are highly competitive, to a large extent driven by end-use markets, and
may be subject to overcapacity, all of which may affect demand for and pricing
of Celanese's products.
5
<PAGE> 9
CELANESE'S OPERATING MARGINS MAY DECREASE IF IT CANNOT PASS ON INCREASED RAW
MATERIAL PRICES TO CUSTOMERS OR IF PRICES FOR ITS PRODUCTS DECREASE FASTER THAN
RAW MATERIAL PRICES
Celanese purchases significant amounts of natural gas, ethylene and
propylene from third parties for use in its production of basic chemicals in the
Acetyl Products and Chemical Intermediates segments, principally methanol,
formaldehyde, acetic acid, vinyl acetate monomer, as well as acrylates and oxo
products. Celanese uses a portion of its output of these chemicals, in turn, as
inputs in the production of further products in the Acetyl Products, Chemical
Intermediates and Acetate Products segments, as well as some products in the
Technical Polymers Ticona, also referred to as Ticona, and Performance Products
segments. Celanese also purchases significant amounts of cellulose or wood pulp
for use in its production of cellulose acetate in the Acetate Products segment.
Celanese purchases significant amounts of natural gas, electricity, coal and
fuel oil to supply the energy required in its production processes.
Although Celanese has agreements providing for the supply of natural gas,
ethylene, propylene, wood pulp, electricity, coal and fuel oil, the contractual
prices for these raw materials and energy vary with market conditions and may be
highly volatile. Costs for raw materials and energy increased significantly in
2000. Factors which have caused volatility in Celanese's raw material prices in
the past and which may do so in the future include:
- Shortages of raw materials due to increasing demand, e.g., from growing
uses or new uses;
- Capacity constraints, e.g., due to construction delays, strike action or
involuntary shutdowns;
- The general level of business and economic activity; and
- The direct or indirect effect of governmental regulation.
Celanese is striving to improve profit margins of many of its products
through price increases when warranted and accepted by the market, however,
Celanese's operating margins may decrease if it cannot pass on increased raw
material prices to customers. Even in periods during which raw material prices
decrease, Celanese may suffer decreasing operating profit margins if raw
material price reductions occur at a slower rate than decreases in the selling
prices of Celanese's products.
Historically, Celanese has not entered into hedging arrangements for future
purchases of raw materials. However, in the second half of 2000, Celanese
entered into forward purchase contracts for slightly less than 50 percent of its
estimated natural gas requirements generally for up to six months forward. As
these forward contracts expire, Celanese may be exposed to future price
fluctuations if the forward purchase contracts are not replaced, and if it
elects to replace them, it may have to replace them at higher costs. Although
Celanese seeks to balance increases in raw material prices with corresponding
increases in the prices of its products, it may not be able to do so, and there
may be periods when such product price increases lag behind raw material cost
increases. In the future, Celanese may consider utilizing a variety of other raw
material hedging instruments in addition to forward purchase contracts.
THE CARBON MONOXIDE SUPPLIER FOR CELANESE'S ACETIC ACID PLANT IN SINGAPORE HAS
BEEN UNABLE TO PROVIDE A CONSISTENT AND RELIABLE SUPPLY OF CARBON MONOXIDE TO
CELANESE, WHICH HAS ADVERSELY AFFECTED, AND MAY CONTINUE TO ADVERSELY AFFECT,
CELANESE'S RESULTS OF OPERATIONS AND ITS ABILITY TO SERVE AND RETAIN ITS ASIAN
CUSTOMERS
In July 2000, Celanese completed construction of, and was prepared to begin
production at, its acetic acid plant in Singapore. Celanese plans to supply
acetic acid directly to its Asian customers and to Celanese's vinyl acetate
monomer and acetate ester plants in Singapore. Celanese has an agreement with a
supplier to supply the acetic acid plant with carbon monoxide, which is a
necessary raw material in the production of acetic acid. This supplier has
experienced a variety of operational difficulties since July 2000 and has been
unable to provide Celanese with a consistent and reliable supply of carbon
monoxide. As a result, Celanese had been unable to produce acetic acid at
expected levels and had to maintain a previously declared force majeure on
acetic acid and vinyl acetate monomer for its Asian customers. Since January
2001, the supplier was able to increase its production of carbon monoxide to a
level which enabled Celanese to achieve
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<PAGE> 10
production rates in acetic acid of approximately 65 percent of stated capacity.
This level of supply was sufficient to allow Celanese to lift its declaration of
force majeure on March 16, 2001. Although Celanese continues to work with its
carbon monoxide supplier to further remedy the supply problems, Celanese cannot
be certain when or if the situation will be fully resolved. Until this situation
is fully resolved, it will continue to adversely affect Celanese's results of
operations and may affect its ability to serve and retain its Asian customers.
FAILURE TO DEVELOP NEW PRODUCTS AND PRODUCTION TECHNOLOGIES OR TO COMPLETE
PRODUCTIVITY AND COST REDUCTION INITIATIVES MAY HARM CELANESE'S COMPETITIVE
POSITION
Celanese's operating results, especially in its Technical Polymers Ticona
and Performance Products segments, significantly depend on the development of
commercially viable new products and applications, as well as production
technologies. If Celanese is unsuccessful in developing new products,
applications and production processes in the future, its competitive position
and operating results will be negatively affected. Likewise Celanese has
undertaken and is continuing to undertake initiatives in all segments to improve
productivity and performance and to generate cost savings. There can, however,
be no assurance that these will be completed or beneficial or that the estimated
cost savings from such activities will be realized.
ENVIRONMENTAL LIABILITIES AND COMPLIANCE COSTS MAY HAVE A SIGNIFICANT NEGATIVE
EFFECT ON CELANESE'S OPERATING RESULTS
Costs related to Celanese's compliance with and potential obligations under
environmental laws for remediation of contaminated sites may have a significant
negative impact on its operating results. These include obligations related to
sites currently or formerly owned or operated by Celanese, or where waste from
its operations was disposed. Celanese also has obligations related to the
indemnity agreement contained in the demerger and transfer agreement between
Celanese AG and Hoechst, also referred to as the Demerger Agreement. Celanese's
accruals for environmental remediation obligations may be insufficient if the
assumptions underlying those accruals prove incorrect or if Celanese is held
responsible for currently undiscovered contamination. See "Celanese and Hoechst
have obligations to pay each other certain amounts, some of which are not yet
determinable" below and "Item 4. Information on the Company -- Environmental and
Other Regulation."
Furthermore, Celanese is involved in several claims, lawsuits and
administrative proceedings relating to environmental matters. While Celanese
does not believe, based upon currently available facts, that the ultimate
resolution of any of such pending matters will have a material adverse effect on
Celanese's operating results, an adverse outcome in any of them may negatively
affect Celanese's earnings in a particular reporting period.
Stricter environmental, safety and health laws and enforcement policies
could result in substantial costs and liabilities to Celanese and could subject
Celanese's handling, manufacture, use, reuse or disposal of substances or
pollutants to more rigorous scrutiny than at present. Consequently, compliance
with these laws could result in significant capital expenditures as well as
other costs and liabilities and materially adversely affect Celanese's business
and operating results.
Stricter environmental policies may also affect demand for Celanese's
products. For example, various United States programs, including the Voluntary
Children's Chemical Evaluation Program and High Production Volume Chemical
Initiative, will potentially require toxicological testing and risk assessments
of a wide variety of chemicals, including chemicals used or produced by
Celanese. Depending on the outcome of these reviews, additional requirements may
be placed on the production, handling or use of these chemicals. Such additional
requirements could increase the cost incurred by Celanese's customers to
purchase or use these products, which could adversely affect the demand for
these products.
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CELANESE'S PRODUCTION FACILITIES HANDLE THE PROCESSING OF SOME VOLATILE AND
HAZARDOUS MATERIALS WHICH SUBJECT CELANESE TO OPERATING RISKS WHICH COULD
ADVERSELY AFFECT CELANESE'S OPERATING RESULTS
Celanese's operations are subject to the operating risks associated with
chemical manufacturing, including the related storage and transportation of raw
materials, products and wastes. These hazards include, among other things:
- Pipeline and storage tank leaks and ruptures;
- Explosions; and
- Discharges or releases of toxic or hazardous substances.
These operating risks can cause personal injury, property damage and
environmental contamination, and may result in the shutdown of affected
facilities and the imposition of civil or criminal penalties. The occurrence of
any of these events may materially adversely affect the productivity and
profitability of a particular manufacturing facility and Celanese's operating
results.
Celanese maintains property, business interruption and casualty insurance
which it believes is in accordance with customary industry practices, but
Celanese cannot provide any assurance that this insurance will be adequate to
fully cover all potential hazards incidental to its business.
For more detailed information on environmental issues, see "Item 4.
Information on the Company -- Environmental and Other Regulation."
FLUCTUATIONS IN EXCHANGE AND INTEREST RATES MAY AFFECT CELANESE'S OPERATING
RESULTS
Celanese is exposed to market risk through commercial and financial
operations. Celanese's market risk consists principally of exposure to
fluctuations in currency exchange rates and interest rates. Celanese has
policies of hedging against changes in currency exchange rates and interest
rates as described below.
As Celanese conducts a significant portion of its operations outside the
euro zone, fluctuations in currencies of countries outside the euro zone,
especially the U.S. dollar, may materially affect Celanese's operating results.
For example, changes in currency exchange rates may affect:
- the relative prices at which Celanese and its competitors sell products
in the same market; and
- the cost of items required in Celanese's operations.
From time to time, Celanese uses financial instruments to hedge its
exposure to foreign currency fluctuations. The notional amounts under forward
contracts outstanding at December 31, 2000 were E865 million.
Celanese holds a variety of interest rate sensitive assets and liabilities
to manage the liquidity and cash needs of its day-to-day operations. Celanese is
primarily exposed to changes in interest rates in the U.S. dollar and the euro.
To manage these risks, Celanese enters into interest rate swap agreements to
reduce the exposure of interest rate risk inherent in Celanese's debt portfolio.
Celanese uses swaps for hedging purposes only. The maturities of these swaps
depend on the underlying debt portfolio.
CELANESE AND HOECHST HAVE OBLIGATIONS TO PAY EACH OTHER CERTAIN AMOUNTS, SOME OF
WHICH ARE NOT YET DETERMINABLE
Under the Demerger Agreement, Celanese agreed to indemnify Hoechst for
environmental liabilities that Hoechst may incur with respect to Celanese's
German production sites, which were transferred from Hoechst to Celanese in
connection with the demerger. Celanese also agreed to indemnify Hoechst against
liabilities for environmental damages or contamination arising under 19
divestiture agreements entered into by Hoechst
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<PAGE> 12
prior to the demerger. As the indemnification obligations depend on the
occurrence of unpredictable future events, the costs associated with them are
not yet determinable and may materially affect operating results.
Celanese's obligation to indemnify Hoechst against liabilities for
environmental contamination in connection with the divestiture agreements is
subject to the following thresholds:
- Celanese will indemnify Hoechst for the total amount of these
liabilities up to E250 million;
- Hoechst will bear the full amount of those liabilities between E250
million and E750 million; and
- Celanese will indemnify Hoechst for one third of those liabilities for
amounts exceeding E750 million.
As of December 31, 2000, E13 million had been spent by Celanese for
environmental contamination liabilities in connection with the divestiture
agreements. Celanese has additional reserves of E180 million as of December 31,
2000, for this contingency and may be required to record additional reserves in
the future.
Also, Celanese has undertaken in the Demerger Agreement to indemnify
Hoechst to the extent that Hoechst is required to discharge liabilities,
including tax liabilities, in relation to assets included in the demerger, where
such liabilities have not been demerged due to transfer or other restrictions.
Under the Demerger Agreement, Celanese also assumed responsibility for 50
percent of the costs incurred in connection with the demerger, and 50 percent of
the applicable real estate transfer taxes. Celanese incurred less than E1
million and E28 million in 2000 and 1999, respectively, related to these
matters.
Under the Demerger Agreement, Celanese will also be responsible, directly
or indirectly, for all obligations to past employees of Hoechst businesses that
were demerged to Celanese. Under the Demerger Agreement, Hoechst agreed to
indemnify Celanese from liabilities (other than liabilities for environmental
contamination) stemming from the agreements governing the divestiture of
Hoechst's polyester businesses, which were demerged to Celanese, so far as such
liabilities relate to the European part of the business. Hoechst has also agreed
to bear 80 percent of the financial obligations arising in connection with the
government investigation and litigation associated with the sorbates industry
for price fixing described in "Item 8. Financial Information -- Legal
Proceedings", and Celanese has agreed to bear the remaining 20 percent.
KUWAIT PETROLEUM CORPORATION HOLDS A SIGNIFICANT NUMBER OF SHARES IN CELANESE
AND MAY BE ABLE TO BLOCK SOME CORPORATE ACTIONS
Kuwait Petroleum Corporation owns 28.6 percent of the Celanese shares
outstanding as of December 31, 2000. Kuwait Petroleum Corporation may have the
ability, as a matter of German corporate law, to block some corporate actions by
Celanese such as mergers, spinoffs and capital measures which require either a
majority of 75 percent of the votes cast or 75 percent of the share capital
represented at a shareholders' meeting. Celanese is not aware of any voting
agreements or agreements of any kind between Kuwait Petroleum Corporation and
any of Celanese's other shareholders. In addition, an officer of Kuwait
Petroleum Corporation has been elected as one of the shareholder representatives
on the Supervisory Board of Celanese.
ITEM 4. INFORMATION ON THE COMPANY
INTRODUCTION
Celanese is incorporated as a stock corporation organized under the laws of
the Federal Republic of Germany. It was incorporated in Germany as Diogenes
Erste Aktiengesellschaft on November 22, 1996 and renamed Celanese AG on October
22, 1999 when it demerged from Hoechst. Celanese's registered office is located
at Frankfurter Strasse 111, 61476 Kronberg/Taunus, Germany, telephone +49 69 305
16000.
HISTORY AND DEVELOPMENT OF THE COMPANY
Celanese traces its roots to 1918 when The American Cellulose & Chemical
Manufacturing Company was founded in the United States by two Swiss brothers,
Drs. Camille and Henry Dreyfus, to produce acetate fibers for fabrics used in
linings, apparel and home furnishings.
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<PAGE> 13
Following the successful start-up of this company, Celanese expanded its
operations in the United States. In the mid-1940s, Celanese commenced operation
of facilities for the production of basic chemicals and chemical intermediates.
In the 1950s, Celanese became a supplier of acetate tow.
In the 1960s, Celanese further expanded the scope of its activities.
Celanese started production of non-cellulosic fibers, such as polyester and
nylon, and developed and commercialized acetyl copolymer resin technology.
Since the mid-1940s, Celanese constructed and acquired significant
production and research facilities in North America and abroad and also entered
into a number of joint ventures in North America, Europe and the Far East with
other acetate, basic chemicals and plastics producers. In particular, in the
technical polymers area, Celanese entered into two joint ventures, one with
Hoechst, which was named Ticona, and another with the Japanese company Daicel
Chemical Industries Ltd. ("Daicel"), named Polyplastics Co., Ltd.
("Polyplastics"), to manufacture and market acetyl copolymer resins based on
Celanese licensed technology.
In 1987 Hoechst acquired Celanese Corporation. Following the acquisition,
Hoechst proceeded to integrate its complementary chemicals and technical
polymers operations with the businesses of Celanese, establishing a combined
basic chemicals, acetates and technical polymers business of global scale.
In 1994, Hoechst embarked on a comprehensive review and re-evaluation of
its strategic goals. Hoechst decided to concentrate on life sciences and to
transfer operational responsibility for the different businesses to the
management of legally separate companies. In implementing the strategy to
realign and to change the focus of its business, Hoechst restructured and
divested many of its activities in the industrial sector. As part of this
process, Hoechst shareholders, at an extraordinary general meeting on July 15
and 16, 1999, approved the demerger, or spin-off, to Celanese AG of the basic
chemicals, acetates and technical polymers businesses that were reported by
Hoechst in its Celanese and Ticona segments, as well as some other businesses
and activities of Hoechst. The demerger became effective on October 22, 1999. On
that date Hoechst distributed all of the outstanding shares of Celanese to
Hoechst's shareholders, with each Hoechst shareholder receiving one Celanese
share for every 10 Hoechst shares owned.
BUSINESS SUMMARY
Celanese is a leading global industrial chemicals company with strong
competitive positions in its major products and production technologies. Its
business involves processing chemical raw materials, such as ethylene and
propylene, and natural products, including natural gas and wood pulp, into
value-added chemicals and chemical-based products. Celanese's leadership
position is based on two key factors: its significant market shares and
competitive cost structures in its major products. Celanese's competitive cost
structures are based on economies of scale, vertical integration, technical
know-how and the use of advanced technologies. The Celanese portfolio consists
of five main business segments: Acetyl Products, Chemical Intermediates, Acetate
Products, Technical Polymers Ticona and Performance Products.
For 2000, Celanese had net sales of E5,207 million and an operating profit
of E83 million from continuing operations. At December 31, 2000, Celanese had
approximately 13,200 employees worldwide from continuing operations. Celanese
has 30 production plants and six research centers in eleven countries. Most of
Celanese's facilities are located in the Americas, principally in the three
North America Free Trade Agreement, or NAFTA, countries: the United States,
Canada and Mexico. Celanese also has major operations, including significant
joint ventures, in Germany and Asia. In 2000, 57 percent of net sales was
derived from sales in North America, 36 percent from sales in Europe, 6 percent
from sales in Asia and Australia and 1 percent from sales in the rest of the
world. Celanese has a large and diverse global customer base comprised
principally of major industrial companies. In 2000, sales to the 10 largest
customers of Celanese accounted for less than 25 percent of its net sales and
the single largest customer represented less than 5 percent of its net sales.
Celanese's aggregate capital expenditures for property, plant and equipment
were E235 million in 2000, E262 million in 1999, and E345 million in 1998. The
United States, Germany and Asia accounted for 33 percent, 26 percent and 18
percent, respectively, of Celanese's capital expenditures in 2000. The capital
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<PAGE> 14
expenditures were financed by means of Celanese's operating cash flows, cash
reserves and additional funds drawn down from existing credit facilities. See
also "Business Segments" for capital expenditures by business segment. For a
description of principal acquisitions and dispositions of businesses during the
last three years, see "Acquisitions and Divestitures", "Item 5. Operating and
Financial Review and Prospects -- Summary of Consolidated Results -- 2000
Compared to 1999 -- Discontinued Operations", and Note 5 to the Consolidated
Financial Statements.
As of December 31, 2000, Celanese had approximately 50,326,355 shares
outstanding and approximately 125,000 shareholders. Its ordinary shares are
traded on the Frankfurt Stock Exchange under the symbol CZZ and on the New York
Stock Exchange under the symbol CZ.
SEGMENT OVERVIEW
Celanese is an integrated company that operates through five principal
business segments: Acetyl Products, Chemical Intermediates, Acetate Products,
Technical Polymers Ticona and Performance Products.
Acetyl Products. This segment produces and supplies acetyl products,
including acetic acid, acetate esters, vinyl acetate monomer and polyvinyl
alcohol. Acetic acid is a commodity used in the production of other basic
chemicals. Acetate esters are used in coatings and inks. Vinyl acetate monomer
is primarily used in a variety of adhesives, paints and coatings. Polyvinyl
alcohol is made from vinyl acetate monomer and is used in textile and paper
sizing, adhesives and building products, and as a raw material in films.
Celanese is the world's leading producer of acetic acid and vinyl acetate
monomer and the largest North American producer of methanol, the major raw
material used for the production of acetic acid. Celanese is the largest
polyvinyl alcohol producer in North America, and the second largest producer in
the world.
Chemical Intermediates. This segment produces and supplies chemical
intermediates, including acrylic acid, acrylate esters, organic solvents and
other intermediates. Acrylic acid and acrylate esters are used in the
manufacture of superabsorbent polymers, paints and coatings, adhesives and in
water treatment applications. Most of the other chemicals produced in this
segment are organic solvents and intermediates for pharmaceutical, agricultural
and chemical products.
Acetate Products. This segment primarily produces and supplies acetate
filament and acetate tow (filter products). Products from this segment are found
in fashion apparel, linings, home furnishings and cigarette filters. Celanese is
one of the world's leading producers of acetate filament and acetate tow,
including production by its joint ventures in Asia.
Technical Polymers Ticona. This segment develops, produces and supplies a
broad portfolio of high performance technical polymers for application in
automotive and electronics products and in other consumer goods, often replacing
metal or glass. Together with its 45 percent-owned affiliate Polyplastics, its
50 percent-owned affiliate Korean Engineering Plastics Company Ltd. and Fortron
Industries, its 50-50 joint venture with Kureha Chemicals Industry of Japan,
Celanese is a leading participant in the global technical polymers business.
Performance Products. This segment includes Trespaphan, the oriented
polypropylene, or OPP, films business, which produces thin films used in
packaging of products such as foodstuffs and cigarette packs, in labels and the
production of capacitors. It also includes Nutrinova, the high intensity
sweetener, and food protection ingredients business.
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The table below illustrates each segment's share of total segment net sales
to external customers since 1998.
2000 NET SALES TO EXTERNAL CUSTOMERS BY SEGMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2000 1999 1998
------------------ ------------------ ------------------
% OF % OF % OF
E SEGMENT(1) E SEGMENT(1) E SEGMENT(1)
----- ---------- ----- ---------- ----- ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Acetyl Products.......................... 2,023 39% 1,487 35% 1,438 34%
Chemical Intermediates................... 1,012 20% 847 20% 850 20%
Acetate Products......................... 756 15% 739 17% 839 20%
Technical Polymers Ticona................ 923 18% 788 19% 750 17%
Performance Products..................... 409 8% 397 9% 407 9%
</TABLE>
- ---------------
(1) The percentages in this column represent the percentage contribution of each
segment to the total of all segments.
Other Activities
The portfolio of Celanese contains other businesses and activities separate
from its principal chemical operations, consisting primarily of general
corporate functions and companies which provide infrastructure services. It also
now includes the innovative products subsidiary Celanese Ventures GmbH, and
Advanced Fiber Materials, comprised of the high performance polymer
polybenzimidazole, or PBI, product line, which was transferred from the Acetate
Products segment effective July 1, 2000. See Note 26 to the Consolidated
Financial Statements for additional information.
STRATEGY
During 2000, Celanese's first full year of operations as an independent
company, Celanese implemented the first phase of its strategy. Celanese
identified and restructured its core businesses, selling remaining non-core
activities such as the Thermphos phosphorous business and the Vinnolit and
Vintron polyvinyl chloride businesses, and achieved cost efficiencies in its
business segments. This was done through cost reduction initiatives and the
closure of a number of higher cost production units in its Acetyl Products,
Acetate Products and Performance Products business segments.
Celanese also commenced the next phase of its strategy in the second half
of 2000. During this growth phase, Celanese is continuing to optimize its
portfolio, particularly in the strategic areas of Acetyl Products, Technical
Polymers Ticona, and Nutrinova, its food ingredients business. Going forward,
Celanese intends to grow its Acetyl Products and Technical Polymers Ticona
segments, as well as Nutrinova, its food ingredients business, by expanding its
global leadership positions and leveraging its strengths into opportunities for
these businesses.
In September 2000, Celanese's Acetyl Products segment, already the world's
leading producer of acetic acid and vinyl acetate monomer, extended its value
chain into a higher value product by purchasing the polyvinyl alcohol business
of Air Products & Chemicals, Inc. An estimated thirty-five percent of vinyl
acetate monomer on the global market is processed into polyvinyl alcohol and,
prior to the acquisition, Air Products had been Celanese's biggest customer for
vinyl acetate monomer. Acetyl Products will continue its expansion by exploring
further opportunities in Asia. Celanese is currently exploring a joint venture
with Shanghai Wujing Chemical Corporation ("SWCC"), a subsidiary of Huayi Group,
to use Celanese's patented acid optimization technology to produce acetic acid.
Celanese also built a new 500,000 metric ton acetic acid plant, which also uses
this technology, on Jurong Island, Singapore, to strengthen its market position
in Asia. See "Item 3. Key Information -- Risk Factors."
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In September 2000, Ticona started up a new 30,000 metric ton per year plant
for Topas(R), its metallocene catalyst based cycloolefin copolymer with superior
optical and moisture barrier properties. The Topas plant in Oberhausen, Germany,
is the first plant in the world to utilize this technology. Technical Polymers
Ticona, already known for its customer service excellence and as a
solutions-driven business that uses advanced polymer technology to produce
materials for a wide spectrum of applications, has announced plans to grow the
business by increasing capacity for several of its core products to meet market
demand. For instance, it plans to more than double the capacity of its Vectra(R)
liquid crystal polymer (LCP) plant in Shelby, North Carolina. The expansion,
which is scheduled to come on stream by February 2002, will add three reactors
to the two already in place and bring the plant's total capacity to 8,500 tons
per year. Technical Polymers Ticona is also expanding its capacity for GUR(R)
ultra-high molecular weight polyethylene (PE-UHMW). A new 30,000 metric tons per
year facility will be located in Bishop, Texas, to replace the existing plant in
Bayport, Texas, doubling Ticona's U.S. GUR capacity.
Nutrinova is actively involved in establishing a global market position in
the quickly growing market for functional foods. In September 2000, Nutrinova
entered into an exclusive international distribution agreement with Opta Food
Ingredients, Inc., for which Nutrinova is using its global market position and
sales network to market and sell Opta's line of oat fiber and bran products
worldwide, excluding the United States, Canada and Israel. Nutrinova will also
shortly introduce to the world market, the fiber Caromax(TM), a dietary fiber
from the carob tree that has a significantly higher physiological benefit and
higher antioxidant effect than traditional dietary fibers.
Celanese is optimizing its remaining businesses in its other segments to
generate cash flow and will participate actively in the chemical industry's
restructuring, developing its portfolio through acquisitions, joint ventures and
alliances. Celanese's Acetate Products segment signed a memorandum of
understanding with Teijin Limited ("Teijin") to form a 50-50 joint venture to
supply the Asian market with acetate filament. Celanese is also exploring
strategic opportunities for its Chemical Intermediates segment and Trespaphan,
its OPP films business, which will take advantage of the consolidation and
restructuring that particularly affect these key industries.
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BUSINESS SEGMENTS
Acetyl Products
The Acetyl Products segment consists of three business lines: Acetyl Chain,
Acetyl Derivatives and Polyols, and Polyvinyl Alcohol. All business lines in
this segment conduct business using the "Celanese" trade name, except Polyvinyl
Alcohol, which uses the trademark "Celvol". The following table lists key Acetyl
Products and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY ACETYL PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Methanol Formaldehyde, Acetic Acid and Methyl
Tertiary Butyl Ether or MTBE, a gasoline
additive
- -------------------------------------------- --------------------------------------------
Acetic Acid Vinyl Acetate Monomer, Acetic Anhydride and
Purified Terephthalic Acid or PTA, an
intermediate used in the production of
polyester resins, films and fibers
- -------------------------------------------- --------------------------------------------
Acetic Anhydride Cellulose Acetate and Pharmaceuticals
- -------------------------------------------- --------------------------------------------
Vinyl Acetate Monomer Paints, Adhesives, Paper Coatings, Films and
Textiles
- -------------------------------------------- --------------------------------------------
Acetate Esters Coatings, Inks
- -------------------------------------------- --------------------------------------------
Polyvinyl Alcohol Adhesives, Building Products, Paper
Coatings, Films and Textiles
- -------------------------------------------- --------------------------------------------
</TABLE>
Business Lines
Acetyl Chain. The acetyl chain business line produces:
- Methanol, a basic chemical building block used in the production of a
variety of chemical intermediates, is principally used internally in
the production of formaldehyde and acetic acid. The balance is sold to
the merchant market. Approximately 20 percent of the merchant market
sales is used for the production of methyl tertiary butyl ether, or
MTBE, which is a gasoline additive;
- Acetic acid, used to manufacture vinyl acetate monomer and other
acetyl derivatives. Celanese manufactures acetic acid for its own use,
for example, by the Acetyl Derivatives & Polyols business line.
Celanese also sells acetic acid to third parties, including producers
of purified terephthalic acid, or PTA, and to other participants in
the acetyl derivatives business;
- Vinyl acetate monomer, used in a variety of adhesives, paints, films,
coatings and textiles;
- Acetic anhydride, a raw material used in the production of cellulose
acetate, detergents and pharmaceuticals; and
- Acetaldehyde, a major feedstock for the production of polyols.
Acetaldehyde is also used in other organic compounds such as
pyridines, which are used in agricultural products.
Celanese is the world's leading producer of acetic acid and is also the
world's leading producer of vinyl acetate monomer, according to the Tecnon
Consulting World Network Acetic Acid and Vinyl Acetate 1999-2009 World Survey.
The Chemical Market Associates Inc.'s 1999 World Methanol Cost Study cites
Celanese as the largest producer of methanol in North America.
Acetic acid, methanol, and vinyl acetate monomer, like other commodity
products, are characterized by cyclicality in pricing. The principal raw
materials in these products are ethylene, which Celanese purchases from multiple
suppliers; natural gas, which is purchased from numerous sources; carbon
monoxide, which is both manufactured and purchased by Celanese under long-term
contracts; and butane, which is purchased
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from several suppliers. All these raw materials, except carbon monoxide, are
themselves commodities and are available from a wide variety of sources.
Celanese's production of acetyl chain products employs leading proprietary
and licensed technologies, including the proprietary acid-optimization
technology. Management believes that Celanese's Clear Lake, Texas facility,
which uses these technologies, is one of the world's lowest cost acetic acid
plants.
As part of its strategy to focus its resources on larger, more efficient
units, Celanese stopped producing acetic acid in Cangrejera, Mexico in mid-July
2000. Customers who purchased acetic acid made at Cangrejera are being supplied
from the Clear Lake, Texas plant.
During July 2000, Celanese began production of acetic acid at its new plant
in Singapore. This unit, with a stated capacity of 500,000 metric tons, makes
use of the same technology as the plant in Clear Lake, Texas. However, during
the course of 2000, a supplier experienced a variety of operational difficulties
and has been unable to provide Celanese with a consistent and reliable supply of
carbon monoxide, a key raw material in the production of acetic acid. As a
result, Celanese had been unable to produce acetic acid at expected levels and
had to maintain a previously declared force majeure on acetic acid and vinyl
acetate monomer for its Asian customers. Since January 2001, the supplier was
able to increase its production of carbon monoxide to a level which enabled
Celanese to achieve production rates in acetic acid of approximately 65 percent
of stated capacity. This level of supply was sufficient to allow Celanese to
lift its declaration of force majeure on March 16, 2001. Although Celanese
continues to work with its carbon monoxide supplier to further remedy the supply
problems, Celanese cannot be certain when or if the situation will be fully
resolved. Until this situation is fully resolved, it will continue to adversely
affect Celanese's results of operations and may affect its ability to serve and
retain its Asian customers. See "Item 3. Key Information -- Risk Factors."
Celanese permanently closed its acetyl units at the Knapsack, Germany, site
at the end of 2000. The units include a combination facility with a
70,000-metric ton capacity for acetic acid and a 110,000-ton capacity for acetic
anhydride, as well as a 170,000-metric ton acetaldehyde plant that fed the
combination facility. Acetic acid customers in Europe are being supplied from
Celanese's plants in Clear Lake, Texas and Singapore. Celanese's Pampa, Texas
and Cangrejera, Mexico, plants supply European customers with acetic anhydride.
On June 7, 2000, Celanese announced a letter of intent to explore the
formation of a joint venture for the production of acetic acid in China with
SWCC, a subsidiary of Huayi Group. SWCC would contribute its existing 110,000
metric ton acetic acid unit to the joint venture, while Celanese would provide
its patented acid-optimization acetic acid technology and an equity
contribution. By applying Celanese acid optimization technology to the facility,
the parties to the joint venture expect to be able to expand the existing unit's
capacity from 110,000 metric tons to up to 280,000 metric tons at an
exceptionally favorable cost compared to a new grass roots unit. The plant
expansion will position the joint venture to take advantage of the rapidly
growing demand for acetic acid in China.
Acetyl Derivatives and Polyols. The acetyl derivatives and polyols
business line produces a variety of solvents, polyols, formaldehyde and other
products, which in turn are used primarily in the manufacture of paints,
coatings, and adhesives.
Many acetyl derivatives products are derived from Celanese's production
of acetic acid and oxo alcohols. Primary products are:
- Ethyl acetate, a solvent used in coatings, inks and adhesives and in
the manufacture of, among other things, photographic films and coated
papers;
- Butyl acetate, a solvent used in inks, pharmaceuticals and perfume;
- Propyl acetate, a solvent used in inks, lacquers and plastics;
- Methyl ethyl ketone, a solvent used in the production of printing inks
and magnetic tapes;
- Butyric acid, an intermediate for the production of esters used in
artificial flavors;
- Propionic acid, an organic acid used to protect and preserve grain;
and
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- Formic acid, an organic acid, used in textile dyeing and leather
tanning.
Polyols and formaldehyde products are derivatives of methanol and are made
up of the following products:
- Formaldehyde, a methanol derivative primarily used to produce adhesive
resins for plywood, particle board, polyacetal engineering resins and a
compound used in making polyurethane;
- Paraformaldehyde, a solid form of formaldehyde used to make glyphosate
herbicides and in coating applications;
- Formcel(R), a water-free formaldehyde solution used in the production of
linking agents for coatings; and
- Polyol products such as pentaerythritol, used, for example, in coatings
and synthetic lubricants; trimethylolpropane, used, for example, in
synthetic lubricants; neopentyl glycol, used, for example, in powder
coatings; and 1,3 butylene glycol, used, for example, in flavorings and
plasticizers.
During January 2000, Celanese began production of acetate esters at its new
plant in Singapore. The unit has a stated capacity of 100,000 metric tons.
During 2000, the plant ran intermittently due to the unreliable supply of acetic
acid which was caused by a supplier's inability to supply carbon monoxide as
noted above. See "Item 3. Key Information -- Risk Factors."
By the end of 2000, the production of the acetyl derivatives and polyols
business line's products at Celaya, Mexico was moved to other locations,
primarily Cangrejera, Mexico, and the Celaya site was closed.
Acetyl derivatives and polyols are commodity products characterized by
pricing cycles. The principal raw materials used in the acetyl derivatives
business line are acetic acid, various alcohols and methanol, all of which
Celanese manufactures for its own use as well as for sales to third parties,
including its competitors in the acetyl derivatives business. Celanese purchases
all of its acetaldehyde requirements for its North American operations from
Petroleos Mexicanos, the Mexican national oil company. Petroleos Mexicanos has
been a reliable supplier, but acetaldehyde is also available from other sources.
Polyvinyl Alcohol. The polyvinyl alcohol business line was purchased
from Air Products and Chemicals, Inc. in September 2000. The business operates
two manufacturing facilities in Calvert City, Kentucky and Pasadena, Texas. The
primary raw material to produce polyvinyl alcohol is vinyl acetate monomer,
while acetic acid is produced as a by-product. Polyvinyl alcohol is a
performance chemical engineered to satisfy particular customer requirements. The
products are sold into diverse industries with varying degrees of
specialization, causing prices to vary significantly depending on industry
segment and end use application. Products are sold on a global basis, and
competition is from all regions of the world. Therefore regional economies and
supply and demand balances affect the level of competition in other regions.
According to Chemical Marketing Reporter, Celanese is the largest North American
producer of polyvinyl alcohol and the second largest producer in the world.
Facilities
The Acetyl Products segment has production sites in the United States,
Canada, Mexico, Singapore, Spain and Germany. Over the last few years, Celanese
has continued to shift its production capacity to lower cost production
facilities while expanding in growth markets. With the closing of its high cost
acetyls plant in Knapsack, Germany and its acetyl chemicals capacity in Celaya,
Mexico, Celanese has shut down more than 480,000 metric tons of high cost acetic
acid capacity since June 1999. However, Celanese's new acetic acid plant at its
Singapore site, which uses the cost-effective acid-optimization technology, will
provide the Company with additional capacity of 500,000 metric tons. See "Item
3. Key Information -- Risk Factors." Celanese also participates in a joint
venture in Saudi Arabia which produces methanol and MTBE.
16
<PAGE> 20
Capital Expenditures
The Acetyl Products segment's capital expenditures for property, plant and
equipment were E80 million, E127 million, and E70 million for the years 2000,
1999 and 1998, respectively. The capital expenditures incurred during these
years related to the capital projects noted elsewhere in this Item 4, as well as
to efficiency and safety improvement-related items associated with the normal
maintenance of the business.
Markets
The following table illustrates the net sales by destination of the Acetyl
Products segment by geographic region for the years ended December 31, 2000,
1999 and 1998.
NET SALES BY DESTINATION -- ACETYL PRODUCTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
2000 1999 1998
--------------- ------------- -------------
% OF % OF % OF
E SEGMENT E SEGMENT E SEGMENT
----- ------- --- ------- --- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
North America................................. 1,021 50% 753 51% 676 47%
Europe/Africa................................. 650 32% 473 32% 475 33%
Asia/Australia................................ 300 15% 224 15% 201 14%
Rest of World................................. 52 3% 37 2% 86 6%
</TABLE>
In the acetyl chain business line, the methanol market is highly regional
and highly dependent on the demand for products made from methanol. In addition
to its own production demands for methanol, Celanese's production is used by
manufacturers of chemical intermediates, and to a lesser extent, by
manufacturers in the wood products industry. Methanol is mainly sold into the
merchant market to a few regional customers. Celanese typically enters into
short-term contracts for the sale of methanol. Acetic acid and vinyl acetate
monomer are global businesses which have several large customers. Generally,
Celanese supplies these global customers under multi-year contracts. The
customers of acetic acid and vinyl acetate monomer produce polymers used in
water-based paints, adhesives, paper coatings, film modifiers and textiles.
Celanese has long-standing relationships with most of these customers.
Acetyl derivatives and polyols are sold to a diverse group of regional and
multinational customers both under multi-year contracts and on the basis of
long-standing relationships. The customers of acetyl derivatives are primarily
engaged in the production of paints, coatings and adhesives. In addition to its
own demand for acetyl derivatives to produce cellulose acetate, Celanese sells
acetyl derivatives to other participants in the cellulose acetate industry.
Celanese manufactures formaldehyde for its own use as well as for third parties
such as manufacturers in the wood products industry. Formaldehyde is mainly sold
into the merchant market to a few regional customers. The sale of formaldehyde,
primarily to customers in the chemical derivatives industry, is largely based on
long-term agreements. Polyols are sold globally to a wide variety of customers,
primarily in the coatings and resins and the specialty products industries.
Polyvinyl alcohol is sold to a diverse group of regional and multinational
customers mainly under single year contracts. The customers of the polyvinyl
alcohol business line are primarily engaged in the production of adhesives,
paper, films, building products, and textiles.
Competition
Principal competitors of Celanese in the Acetyl Products segment include
Acetex Corporation, Borden Chemicals & Plastics L.P., BP Amoco p.l.c. ("BP
Amoco"), Chang Chun Petrochemical Co., Ltd., Clariant AG, Daicel, The Dow
Chemical Company ("Dow"), Eastman Chemical Corporation ("Eastman"), E. I. Du
Pont de Nemours and Company ("DuPont"), Methanex Corporation ("Methanex"),
Millennium Chemicals Inc. ("Millennium"), Nippon Goshei, Perstorp Inc., and
Showa Denko K.K., Kuraray Co. Ltd.
17
<PAGE> 21
Chemical Intermediates
The Chemical Intermediates segment consists of three business lines:
acrylates, oxo products and specialties. All business lines in this segment
conduct business using the "Celanese" trade name. The following table lists key
Chemical Intermediates products and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY CHEMICAL INTERMEDIATES PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Acrylic Acid and Acrylate Esters Superabsorbent Polymers, Coatings and
Adhesives
- -------------------------------------------- --------------------------------------------
Amines Agricultural Products and Water Treatments
- -------------------------------------------- --------------------------------------------
Carboxylic Acids Lubricants, Detergents and Specialties
- -------------------------------------------- --------------------------------------------
Oxo Alcohols Plasticizers, Acrylates, Esters, Solvents
and Inks
- -------------------------------------------- --------------------------------------------
</TABLE>
Business Lines
Acrylates. The acrylates business line produces and supplies acrylic
acid and a variety of acrylate esters, which consist of methyl acrylate, ethyl
acrylate, butyl acrylate and 2-ethylhexyl acrylate.
The primary end uses of acrylic acid and acrylate esters are in the
manufacture of:
- Superabsorbent polymers that are used, for example, in diapers;
- Paints and coatings;
- Adhesives; and
- Water treatment applications, such as flocculating agents.
Prices for acrylate products are subject to the cyclical trends in the
basic chemicals industry.
The primary raw materials for these products are propylene, which
Celanese purchases from a variety of sources, and oxo alcohols, which
Celanese produces itself.
The expansion of acrylic acid annual production capacity at the Clear
Lake, Texas plant to 290,000 metric tons was completed in the first
half of 1998. Celanese has expanded further into the European market by
operating a plant owned by Dow at a site in eastern Germany, which came
on stream in February 2000. Through this project, Celanese produces
acrylic acid and acrylate esters, sharing approximately 50 percent of
the offtake with Dow.
Oxo. The oxo business line produces organic solvents and intermediates
such as:
- Butanol, used as a solvent for lacquers, dopes and thinners, and as an
intermediate in the manufacture of chemicals, such as butyl acrylate;
- Propanol, used as an intermediate in the production of amines for
agricultural chemicals and as a solvent for inks, resins, insecticides
and waxes;
- Butyraldehyde, used, for example, in the production of polyols,
alcohols, safety glass and fabric coatings, and as an intermediate for
2-ethylhexanol and butanol;
- Propionaldehyde, used, for example, in the manufacture of propanol,
the synthesis of fertilizers, and in flavor and fragrance chemicals;
and
- 2-ethylhexanol, used as an intermediate, for example, for plasticizers
and fuel additives, and in the production of 2-ethylhexyl acrylate,
which in turn is used, for example, to manufacture water based resins
for paint, textiles and paper coatings.
18
<PAGE> 22
Generally, demand for oxo products depends on developments in the
construction and automotive industries. Uses for this business line's products
are, to a large degree, in the manufacture of lacquers and paints, as well as in
plasticizers, which can be found in floorings, polyvinyl chloride ("PVC") flex
cables, synthetic leather and covers for car chassis. They are also used in
smaller scale automotive applications, such as safety glass, synthetic motor
oils or as octane enhancers.
Prices for oxo products, like other basic chemical commodity prices, follow
cyclical trends.
The primary raw materials for these products are ethylene and propylene,
both of which are purchased from a variety of sources, and synthesis gas, which
is manufactured from crude oil or natural gas.
A substantial portion of the oxo business line products is consumed by
other Celanese business lines.
Specialties. The specialties business line produces:
- Carboxylic acids such as pelargonic acid, used in detergents and
synthetic lubricants, and heptanoic acid, used in plasticizers and
synthetic lubricants;
- Amines such as methyl amines, used in agrochemicals, monoisopropynol
amines, used in herbicides, and butyl amines, used in the treatment of
rubber and in water treatment; and
- Oxo derivatives and special solvents, such as crotonaldehyde, which is
used by the Performance Products segment for the production of
sorbates, as well as raw materials for the fragrance and food
ingredients industry.
The prices for these products are relatively stable due to
long-term contracts with customers whose industries are not,
generally, subject to the cyclical trends of commodity chemicals.
The primary raw materials for these products are olefins and
ammonia, which are purchased from the world market based on
international prices.
Facilities
The Chemical Intermediates segment has production sites in the United
States, Germany and Mexico.
Over the past several years, Celanese has expanded production at its Bay
City, Texas, its Bucks, Alabama and its Oberhausen, Germany, sites. These have
been low cost, incremental expansions of butanol, 2-ethylhexanol, alkyl amines
and carboxylic acid capacities that were made in response to increased demand
for these products from both customers and other Celanese business lines. These
expansions have reduced average production unit costs for all derivative
products.
Capital Expenditures
The Chemical Intermediates segment's capital expenditures for property,
plant and equipment were E40 million, E46 million, and E97 million for the years
2000, 1999 and 1998, respectively. The capital expenditures incurred during
these years related to the capital projects noted elsewhere in this Item 4, as
well as to efficiency and safety improvement-related items associated with the
normal maintenance of the business.
19
<PAGE> 23
Markets
The following table illustrates the destination of the net sales of the
Chemical Intermediates segment by geographic region for the years ended December
31, 2000, 1999 and 1998.
NET SALES BY DESTINATION -- CHEMICAL INTERMEDIATES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
--------------- --------------- ---------------
% OF % OF % OF
E SEGMENT E SEGMENT E SEGMENT
----- ------- ----- ------- ----- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
North America.............................. 494 49% 469 55% 451 53%
Europe/Africa.............................. 378 37% 302 36% 244 29%
Asia/Australia............................. 117 12% 60 7% 81 10%
Rest of World.............................. 23 2% 16 2% 74 8%
</TABLE>
Celanese's acrylates business line serves a broad customer base across
several end uses and regions. Due to the consolidation of superabsorbant polymer
manufacturers with other acrylates producers, Celanese is shifting its focus to
other areas of the acrylates market. End use growth continues as a result of
acrylic acid and acrylate esters performance characteristics and
substitutability. Celanese believes a key to success in this business is the
ability to be a competitive and reliable supplier while investing in the
business to support long-term growth. The oxo market is characterized by
oversupply and numerous competitors. Celanese's oxo business line has a broad
customer base, and Celanese has long-standing relationships with most of these
customers.
The specialties business line primarily serves global markets in the
synthetic lubricant, agrochemical, rubber processing and other specialty
chemical areas. Much of the specialties business line involves "one customer,
one product" relationships, where the business develops customized products with
the customer, but the specialties business line also sells several chemicals
which are priced more like commodity chemicals.
Competition
The Chemical Intermediates segment competes with, among others, Air
Products, Atofina S.A., BASF AG ("BASF"), Dow, Eastman, Nippon Shokubai Co.,
Ltd, and Rohm & Haas Company.
Acetate Products
The Acetate Products segment consists of two major business lines, acetate
filament and acetate filter products. Both of these business lines use the
"Celanese" brand to market their products. The following table lists key
products of the Acetate Products segment and their major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY ACETATE PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Acetate Filament Fashion Apparel, Linings and Home
Furnishings
- -------------------------------------------- --------------------------------------------
Acetate Tow Cigarette Filters
- -------------------------------------------- --------------------------------------------
</TABLE>
Business Lines
Products from the two major business lines are found in fashion apparel,
linings and home furnishings and cigarette filters. According to the 1997
Stanford Research Institute International Chemical Economics Handbook, Celanese
is the world's leading producer of both acetate filament and acetate tow,
including production of acetate tow by its joint ventures in Asia.
Acetate products are made by processing wood pulp with acetic anhydride to
form acetate flake. Celanese purchases wood pulp which is made from reforested
trees from major suppliers and produces acetic anhydride
20
<PAGE> 24
internally. The acetate flake is then further processed into acetate fiber in
the form of a tow band or filament. The acetate filament business line supplies
products primarily to the textiles industry. Demand for acetate filament is
dependent on fashion trends and the world economy. Recent fashion changes, such
as the trend to casual office wear, have negatively affected demand for lining
and shell material. In addition, market conditions in Asia have significantly
affected the overall global textile business and negatively affected consumption
of all fibers, including acetate. Product substitution from acetate filament to
polyester fibers has also occurred. Celanese is working more closely with
downstream apparel manufacturers and major retailers to increase awareness of
acetate's suitability for high end fashion apparel due to its breathable and
luxurious qualities. Celanese is also pursuing opportunities in other market
segments such as men's shirts and pants.
In July 2000, Celanese signed a memorandum of understanding with Teijin to
form a 50-50 joint venture to supply the Asian market with acetate filament.
Celanese will supply the venture with acetate flake. The joint venture is
expected to be completed by mid-year 2001.
The acetate filter products business line produces acetate tow, which is
used primarily in cigarette filters. Celanese has a 30 percent interest in three
manufacturing joint ventures with Chinese state-owned enterprises that produce
cellulose acetate flake and tow in China. World demand for acetate tow increased
substantially during the early to mid-1990s, principally as a result of
decisions by state-owned tobacco enterprises in China to convert production from
unfiltered to filtered cigarettes. With the Chinese conversion to filtered
cigarettes being substantially complete, demand growth from this source has
slowed significantly. Currently, the acetate tow market is characterized by
oversupply, and projected demand growth is low.
The Acetate Products segment has been implementing a major cost reduction
and operations improvement program. The program is directed toward achieving
higher productivity of employees and equipment. Celanese is in the process of
taking major steps to restructure its acetate products businesses as part of its
strategy to maximize its global manufacturing efficiency. The steps include the
following actions:
- The Drummondville, Canada acetate filament facility was shut down at the
end of the first quarter of 2000.
- The Rock Hill, South Carolina, acetate filament production is scheduled
to be phased out by the end of 2002 or early in 2003. The site will
continue to produce acetate flake. Celanese is planning to shift
existing Rock Hill production to its other acetate filament plants.
- Celanese closed its acetate flake production in Ocotlan, Mexico in the
third quarter of 2000. In addition, the filter products business is
considering the reduction of acetate tow capacity at its Ocotlan
facility.
Facilities
The Acetate Products segment has production sites in the United States,
Canada, Mexico and Belgium, and participates in three manufacturing joint
ventures in China.
Capital Expenditures
The Acetate Products segment's capital expenditures for property, plant and
equipment were E30 million, E30 million, and E69 million for the years 2000,
1999 and 1998, respectively. The capital expenditures incurred during these
years related to the capital projects noted elsewhere in this Item 4, as well as
to efficiency and safety improvement-related items associated with the normal
maintenance of the business.
21
<PAGE> 25
Markets
The following table illustrates the distribution of the net sales of the
Acetate Products segment by geographic region for the years ending December 31,
2000, 1999 and 1998.
NET SALES BY DESTINATION -- ACETATE PRODUCTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
2000 1999 1998
------------- ------------- -------------
% OF % OF % OF
E SEGMENT E SEGMENT E SEGMENT
--- ------- --- ------- --- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
North America.................................. 312 41% 303 41% 418 50%
Europe/Africa.................................. 224 30% 155 21% 143 17%
Asia/Australia................................. 197 26% 236 32% 234 28%
Rest of World.................................. 23 3% 45 6% 44 5%
</TABLE>
In the acetate filament industry, Celanese's sales are made to a large
number of textile companies which range in size from the largest in the industry
to others which are quite small. The textile companies either weave or knit the
acetate filament yarns to produce greige fabrics. The greige fabrics are then
dyed and finished, either by the greige fabrics manufacturer or by converters
who buy the fabrics and contract with dyeing and finishing companies to process
the fabrics. The finished fabrics are sold to manufacturers who cut and sew the
fabrics into apparel for retail stores. The textile industry, in particular the
apparel portion of the industry, continues to undergo structural changes as
production moves from high-wage to low-wage countries. In recent years, this has
resulted in a changing customer base for all participants in the textile chain
from the yarn manufacturer to the garment manufacturer. Market conditions in
Asia have reduced profitability in the textile industry throughout the world,
with many manufacturers in the textile chain reducing capacity, vertically
integrating with other manufacturers or exiting from the business. Product
substitution to polyester fibers has also occurred. Celanese's acetate filament
business has been adversely affected by these trends in the industry. Higher
energy and raw materials prices coupled with increased price competition in
North America also had an unfavorable impact in 2000.
Sales in the acetate filter products industry are principally to the major
tobacco companies that account for a majority of worldwide cigarette production.
Celanese typically enters into both long-term and short-term contracts with its
major customers. Celanese's contracts with its largest customer, with which it
has a long-standing relationship, have been entered into on a year-by-year
basis, and its second largest customer had been supplied under a long-term
contract that expired at the end of 2000. Celanese is continuing to supply a
similar share of this customer's acetate filter products requirements while a
new long-term contract is being negotiated. In recent years, the cigarette
industry has experienced consolidation. In the acetate filter products industry,
changes in the cigarette manufacturer customer base and shifts among suppliers
to those customers have had significant effects on acetate tow prices in the
industry as a whole.
Competition
Principal competitors in the Acetate Products segment include the Acordis
Industrial Nederland bv, Daicel, Eastman, Mitsubishi Rayon Company, Limited,
Novaceta S.p.a., and Rhodia S.A. ("Rhodia").
Technical Polymers Ticona
Ticona develops, produces and supplies a broad portfolio of high
performance technical polymers.
22
<PAGE> 26
The following table lists key Ticona products, their trademarks, and their
major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY TICONA PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
Hostaform(R)/Celcon(R) (Polyacetals) Automotive, Electronics and Consumer
Products
- -------------------------------------------- --------------------------------------------
GUR(R) (Ultra High Molecular Weight Profiles, Battery Separators and Industrial
Polyethylene or PE-UHMW) Specialties
- -------------------------------------------- --------------------------------------------
Celanex(R)/Vandar(R) (Polyester Engineering Electrical, Electronics, Automotive,
Resins) Appliances and Consumer Products
- -------------------------------------------- --------------------------------------------
Vectra(R) (Liquid Crystal Polymers) Electronics, Telecommunications and
Automotive
- -------------------------------------------- --------------------------------------------
Fortron(R)* (Polyphenylene Sulfide or PPS) Electronics, Automotive and Industrial
- -------------------------------------------- --------------------------------------------
Celanese Nylon 6/6(R) Automotive
- -------------------------------------------- --------------------------------------------
Topas(R) (Cycloolefin Copolymer) Medical Applications, Food and
Pharmaceuticals Packaging, Optical, Color
Toner Binders
- -------------------------------------------- --------------------------------------------
</TABLE>
* Fortron is a registered trademark of Fortron Industries.
Ticona's technical polymers have chemical and physical properties enabling
them, among other things, to withstand high temperatures, resist chemical
reactions with solvents and resist fracturing or stretching. These products are
used in a wide range of performance-demanding applications in the automotive and
electronics sectors and in other consumer and industrial goods, often replacing
metal or glass.
Ticona is an innovation-oriented business. Ticona focuses its efforts on
developing new markets and applications for its product lines, often developing
custom formulations to satisfy the technical and processing requirements of a
customer's applications. Ticona's customer base consists primarily of a large
number of plastic molders and component suppliers, which are often the primary
suppliers to original equipment manufacturers, or OEMs. Ticona works with these
molders and component suppliers as well as directly with the OEMs to develop and
improve specialized applications and systems.
Prices for most of these products, particularly specialized product grades
for targeted applications, reflect the value added in complex polymer chemistry,
precision formulation and compounding, and the extensive application development
services provided. The specialized product lines are not particularly
susceptible to cyclical swings in pricing. In standard grades, pricing is much
more competitive, with many small minimum-service providers competing for volume
sales.
Product Lines
Following is a description of Ticona's principal product lines.
Polyacetals are sold under the trademarks, Celcon in North America and
Hostaform in Europe and the rest of the world. Polyplastics, in which Ticona
holds a 45 percent ownership interest, is a leading supplier of polyacetals and
other engineering resins in the Asia/Pacific region. Ticona further strengthened
its position in this region by acquiring a 50 percent share of Korean
Engineering Plastics in December 1999. Korean Engineering Plastics is a leader
in the marketing and production of polyacetals in Korea. Polyacetals are used
for mechanical parts, including door locks and seat belt mechanisms, in
automotive applications and in electrical, consumer and industrial applications
such as keyboards, ski bindings, and gears for appliances.
The primary raw material for polyacetals is formaldehyde, which is
manufactured from methanol. Ticona currently purchases formaldehyde in the
United States from Celanese's Acetyl Products segment and, in Europe,
manufactures formaldehyde from purchased methanol. Methanol is a readily
available commodity.
GUR, an ultra high molecular weight polyethylene or PE-UHMW, is an
engineered material used in heavy-duty automotive and industrial applications
such as car battery separator panels and industrial conveyor belts, as well as
in specialty medical and consumer applications, such as porous tips for marker
pens, sports equipment and artificial prostheses. Topas, a metallocene catalyst
based cycloolefin copolymer, or COC, is a newly engineered material. Topas has
been developed to be used in applications where transparency, high
23
<PAGE> 27
temperature resistance and gas barrier properties are key requirements, such as
in optical applications and packaging films for sterile medical devices and food
storage. Ticona has commenced production at its new plant for Topas in
Oberhausen, Germany in September 2000.
The basic raw material for GUR(R) and Topas(R) is ethylene, a widely
available commodity chemical with cyclical pricing. Smaller volume specialty
co-monomers for COC production are manufactured by Ticona.
Polyesters such as Celanex(R) polybutylene terephthalate, or PBT, and
Vandar(R) are used in a wide variety of automotive, electrical and consumer
applications, including ignition system parts, radiator grilles, electrical
switches, appliance housings, boat fittings and perfume bottle caps.
Impet-Hi(TM) polyethylene terephthalate, or PET, is a polyester which exhibits
rigidity and strength useful in large injection molded part applications.
Riteflex(R) is a co-polyester which adds flexibility to the range of high
performance properties offered by Ticona's other products. Liquid crystal
polymers, or LCPs, such as Vectra(R), are used in electrical and electronics
applications and for precision parts with thin walls and complex shapes.
Fortron(R), a polyphenylene sulphide, or PPS, product, is used in a wide variety
of automotive and other applications, especially those requiring heat
resistance, including fuel system parts, radiator pipes and halogen lamp
housings, and often replaces metal in these demanding applications. Fortron is
manufactured by Fortron Industries. Celstran(R) and Compel(R) are long fiber
reinforced thermoplastics, which impart extra strength and stiffness, making
them more suitable for larger parts than conventional thermoplastics. Celanese
Nylon 6/6(R), a polyamide, is resistant to lubricants and fuels, making it
useful in automotive applications.
Raw materials for these products vary. Base monomers for polyesters, such
as dimethyl terephthalate or DMT and PTA, are widely available with pricing
dependent on the broader polyester fiber and packaging resins market conditions.
Smaller volume specialty co-monomers for these products are typically supplied
by a few companies. Celanese has entered into long-term contracts for the supply
of intermediate raw materials to produce Celanese Nylon 6/6.
Facilities
Ticona has polymerization, compounding and research and technology centers
in Germany and the United States, as well as additional compounding facilities
in the United Kingdom and Brazil.
Capital Expenditures
Ticona's capital expenditures for property, plant and equipment were E58
million, E40 million, and E66 million for the years 2000, 1999 and 1998,
respectively. In addition to expenditures relating to efficiency and safety
improvement-related items associated with the normal maintenance of the
business, Ticona's principal areas of investment included the following:
expanding its capacity for GUR ultra-high molecular weight polyethylene
(PE-UHMW) by building a new 30,000 metric tons per year facility in Bishop,
Texas, replacing the existing plant in Bayport, Texas, and doubling its U.S.
capacity. The new plant is expected to come on stream in 2002. Ticona is also
more than doubling the capacity of its Vectra(R) LCP plant in Shelby, North
Carolina. This expansion, which is scheduled to come on stream by February 2002,
will add three reactors to the two already in place and bring the plant's total
capacity to 8,500 tons per year.
24
<PAGE> 28
Markets
The following table illustrates the destination of the net sales of the
Technical Polymers Ticona segment by geographic region for the years ending
December 31, 2000, 1999 and 1998.
NET SALES BY DESTINATION -- TECHNICAL POLYMER TICONA SEGMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
2000 1999 1998
------------- ------------- -------------
% OF % OF % OF
E SEGMENT E SEGMENT E SEGMENT
--- ------- --- ------- --- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
North America.................................. 518 56% 438 56% 405 54%
Europe/Africa.................................. 360 39% 314 40% 323 43%
Asia/Australia................................. 22 2% 19 2% 15 2%
Rest of World.................................. 23 3% 17 2% 7 1%
</TABLE>
Ticona's consolidated net sales do not include the sales of Polyplastics or
Korean Engineering Plastics, which are accounted for under the equity method. If
Ticona's portion of the sales made by Polyplastics and Korean Engineering
Plastics were included in the chart above, the percentage of sales sold in
Asia/Australia would increase substantially, reflecting Polyplastics' and Korean
Engineering Plastics' leading positions in those markets. Ticona's principal
customers are suppliers to the automotive industries as well as industrial
suppliers. These customers primarily produce engineered products, and Ticona
works closely with its customers to develop and improve specialized applications
and systems. Ticona has long-standing relationships with most of its major
customers, but it also uses distributors to reach a larger customer base. For
most of Ticona's product lines, contracts with customers typically have a term
of one to two years.
Competition
Ticona's principal competitors include Bayer AG, DuPont and General
Electric Company. Smaller regional competitors include Asahi/America, Inc., DSM
NV, Honeywell International Inc., Mitsubishi Plastics, Inc., Rhodia, Royal
Philips Electronics N.V., Teijin and Toray Industries Inc.
Performance Products
The Performance Products segment consists of the OPP films business
conducted by Trespaphan and the food ingredients business conducted by
Nutrinova.
These businesses use their own trade names to conduct business. The
following table lists key products of the Performance Products segment and their
major markets.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
KEY PERFORMANCE PRODUCTS MAJOR MARKETS
- -------------------------------------------- --------------------------------------------
OPP Films Packaging, Labeling and Electrical
Engineering (Capacitors)
- -------------------------------------------- --------------------------------------------
Sunett(R) Beverages, Confections, Dairy Products and
Pharmaceuticals
- -------------------------------------------- --------------------------------------------
Sorbates Dairy Products, Baked Goods, Beverages,
Animal Feeds, Spreads and Delicatessen
Products
- -------------------------------------------- --------------------------------------------
</TABLE>
Business Lines
OPP Films. The OPP films business line, conducted by Trespaphan, was
formed in 1969. It manufactures and markets OPP films, is a significant
participant in the world-wide OPP films business and has a leading position in
Europe. Its OPP films are made from very pure polypropylene granules and are
oriented, high strength films which are very thin, ranging from 3.5 um (0.0035
mm) to 100 um (0.1 mm),
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which is about twice the diameter of a human hair. OPP films are used in the
packaging of products such as foodstuffs and cigarette packs, in labels and,
because of their extreme purity, for highly technical purposes in the production
of capacitors.
The primary raw material of this business line is polypropylene, which is
readily available and is purchased from several third party suppliers. Prices
for the majority of this business's products are extremely sensitive to demand,
industry capacity and the cost of key raw materials.
Food Ingredients. The food ingredients business conducted by Nutrinova
was formed in 1997. Celanese's food ingredients business consists of: high
intensity sweeteners and food protection ingredients, such as sorbic acids and
sorbates. Acesulfame K, a high intensity sweetener marketed under the trademark
Sunett, is used in a wide variety of beverages, confections and dairy products
throughout the world.
The primary raw materials of this business line are diketene and sulfur
trioxide for Sunett, ketene and crotonaldehyde for sorbic acids. Sunett pricing
for targeted applications reflects the value added in the precision formulations
and extensive technical services provided. In May 2000, Nutrinova won a patent
infringement lawsuit in the United Kingdom. The high court ruled that Scanchem
and Beijing Vitasweet infringed upon Nutrinova's European patent for making
Sunett, which expires in 2005. Nutrinova's strict patent enforcement strategy
resulted in this judgment as well as the settlement of other patent infringement
matters. Sorbates pricing is extremely sensitive to demand and industry capacity
and is not necessarily dependent on the prices of raw materials.
Facilities
Trespaphan's primary activities are in Europe and North America, with
manufacturing plants in Germany, Mexico, France and South Africa. Trespaphan's
manufacturing plant in the United Kingdom was closed at the end of 1999 as part
of a strategic repositioning of the business. Nutrinova has production
facilities in Germany.
Capital Expenditures
The Performance Products segment's capital expenditures for property, plant
and equipment were E18 million, E12 million, and E35 million for the years 2000,
1999 and 1998, respectively. The capital expenditures incurred during these
years related to efficiency and safety improvement-related items associated with
the normal maintenance of the business.
Markets
The following table illustrates the destination of the net sales of the
Performance Products segment by geographic region for the years ending December
31, 2000, 1999 and 1998.
NET SALES BY DESTINATION -- PERFORMANCE PRODUCTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
--------------- --------------- ---------------
% OF % OF % OF
E SEGMENT E SEGMENT E SEGMENT
----- ------- ----- ------- ----- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
North America.............................. 127 31% 111 28% 98 24%
Europe/Africa.............................. 252 62% 233 59% 255 63%
Asia/Australia............................. 12 3% 11 3% 12 3%
Rest of World.............................. 18 4% 42 10% 42 10%
</TABLE>
The market for OPP films is highly fragmented. Trespaphan has customers
mainly in the food packaging and tobacco industries. As a part of its strategy
to shift from a production/volume oriented manufacturer to a market-oriented
supplier of packaging solutions, Trespaphan is focusing on higher value market
segments and
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<PAGE> 30
specialty product grades such as high performance packaging films and films for
label and capacitor applications. Nutrinova markets Sunett directly, primarily
to a limited number of large multinational and regional customers in the
beverage and food industry under long-term contracts. Nutrinova markets food
protection ingredients primarily through regional distributors to small and
medium sized customers and directly through regional sales offices to large
multinational customers in the food industry under contracts which typically
have one-year terms. In September 2000, Nutrinova signed an exclusive
international distribution agreement with Opta Food Ingredients, Inc. to market
and sell Opta's line of oat fiber and bran products worldwide, excluding the
United States, Canada and Israel. Marketing of these products began in the first
quarter of 2001.
Competition
Principal competitors of Trespaphan are AET Inc., Exxon Mobil Corporation,
and UCB Films. Nutrinova's principal competitors are Daicel, Holland Sweetener
Company, The Nutrasweet Company, other Japanese manufacturers and several
Chinese manufacturers.
OTHER ACTIVITIES
Other Activities includes revenues mainly from the captive insurance
companies, Celanese Ventures GmbH and the high performance polymer PBI as well
as several service companies which do not have significant sales. In the second
quarter of 2000, Celanese acquired 100 percent of Axiva GmbH, a process
technology and engineering business, from Aventis S.A. In the fourth quarter of
2000, Celanese sold 75 percent of the process technology and engineering
business of Axiva GmbH to Siemens and retained selected projects, which it
continues to operate in the process technology entity which was renamed to
Celanese Ventures GmbH. Celanese Ventures promotes research projects that lie
outside of Celanese's core businesses or, due to their long-term perspective and
widely spread application possibilities, cannot be operated by the businesses
alone. Celanese Ventures is presently active in developing membrane electrode
units for fuel cells, new catalysts for high-performance polymers and innovative
food ingredients. Effective July 1, 2000, Advanced Fiber Materials, comprised of
the high performance polymer PBI product line, was transferred from the Acetate
Products segment to Other Activities to reflect the strategic alignment of PBI
with Celanese Ventures' fuel cell project. See Note 26 to the Consolidated
Financial Statements.
ACQUISITIONS AND DIVESTITURES
Celanese made the following acquisitions during 2000 and 1999:
In May 2000, Celanese acquired 100 percent of Axiva GmbH, a process
technology and engineering business, from Aventis S.A. for a purchase price of
DM 75 million (E38 million). In October 2000, Celanese sold 75 percent of the
process technology and engineering business of Axiva GmbH to Siemens and
retained selected projects, which it continues to operate in the process
technology entity, which was renamed to Celanese Ventures GmbH. Celanese
received gross proceeds of DM 20 million (E10 million) on the sale.
In September 2000, Celanese completed the acquisition of the polyvinyl
alcohol business of Air Products and Chemicals, Inc. for U.S.$326 million (E359
million).
In the third quarter of 1999, Celanese acquired all the outstanding shares
of Celanese Canada, Inc. not previously owned by Celanese. Celanese paid CAD 486
million (E303 million) for this 44 percent minority interest.
In December 1999, Ticona acquired a 50 percent ownership in Korea
Engineering Plastics for approximately 110 billion Korean Won (E94 million).
Celanese made the following divestitures during 2000:
In January 2000, Celanese sold its phosphorous and phosphorous derivatives
business, conducted by the Thermphos Group, to the Thermphos Group's management.
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In July 2000, Celanese sold its 50 percent interest in Vinnolit Kunstoff
GmbH, its joint venture with Wacker Chemie GmbH, and its 100 percent interest in
Vintron GmbH, both European producers of high performance polyvinyl chloride or
PVC products, to institutional funds managed by Advent International
Corporation.
Celanese received gross proceeds of E35 million in 2000 relating to the
sale of these discontinued operations.
Celanese made the following divestitures during 1999:
In September 1999, Celanese sold its approximate 52 percent interest in
Copley Pharmaceuticals Inc. to Teva Pharmaceutical Industries, Ltd.
In December 1999, Celanese sold the following businesses and investments:
- its polyester fiber and bottle resin business in Millhaven, Ontario,
Canada, to Arteva BV, which operates under the business name KoSa;
- its ethylene oxide/ethylene glycol business to Old World Industries,
Inc;
- its U.S. and Japanese separation products businesses, Celgard, to
Daramic Inc., a wholly-owned subsidiary of Polypore Inc.;
- its 46 percent holding in the fluoropolymer manufacturer Dyneon to the
Minnesota Mining and Manufacturing Company; and
- its 50 percent share in the polypropylene joint venture Targor to BASF.
Celanese received gross proceeds of E1,001 million in 1999 from the sale of
these discontinued operations.
During 1999, Celanese s