20-F 1 g20f-27280.htm 20-F

As Filed with the Securities and Exchange Commission on March 7, 2002

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, 2001

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:

Title of each class
Ordinary Shares with no par value

Name of each exchange on which registered
New York Stock Exchange

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

50,334,891

(as of December 31, 2001)

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.

Yes [X]

No [ ]

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [ ]

Item 18 [X]

TABLE OF CONTENTS

Part I

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	4
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	25
Acquisitions and Divestitures	25
eBusiness	26
Raw Materials and Energy	26
Research and Development	26
Intellectual Property	27
Environmental and Other Regulation	28
Organizational Structure	31
Description of Property	31
Item 5. Operating and Financial Review and Prospects	36
Basis of Presentation	36
Major Events in 2001	37
Financial Highlights	37
Overview – 2001 Compared with 2000	38
Selected Data by Business Segment	39
Summary by Business Segment – 2001 Compared with 2000	40
Summary of Consolidated Results – 2001 Compared with 2000	43
Summary by Business Segment – 2000 Compared with 1999	47
Summary of Consolidated Results – 2000 Compared with 1999	50
Liquidity and Capital Resources	53
Market Risks	57
European Monetary Union	59
Critical Account Policies and Issues	59
New Accounting Standards	60
Outlook	61
Item 6. Directors, Senior Management and Employees	63
Directors and Senior Management	63
Compensation of Directors and Officers	65
Incentive Plans	66
Board Practices	67
Employees	70
Share Ownership	70
Item 7. Major Shareholders and Related Party Transactions	71
Major Shareholders	71
Related Party Transactions	72
Item 8. Financial Information	72
Export Sales	72
Legal Proceedings	72


Dividend Policy	75
Significant Changes	75
Item 9. The Offer and Listing	75
Nature of Trading Market	75
Item 10. Additional Information	79
Articles of Association	79
Material Contracts	82
Exchange Controls and Other Limitations Affecting Security Holders	83
Taxation	83
Item 11. Quantitative and Qualitative Disclosures About Market Risk	87
Interest-Rate Risk Management	87
Foreign-Exchange Risk Management	88
Commodity Risk Management	88
Stock Based Compensation Risk Management	89
Item 12. Description of Securities Other Than Equity Securities	89
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies	89
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	89
Item 15. Reserved	89
Item 16. Reserved	89
PART III
Item 17. Financial Statements	89
Item 18. Financial Statements	89
Item 19. Exhibits	90
Index to Consolidated Financial Statements	F-2

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 the 10 other member states of the European Union introduced the euro or € as their common currency and established fixed conversion rates between their existing sovereign currencies and the euro. Greece became the twelfth member of the European Monetary Union (EMU) on January 1, 2001. 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 €1.00. 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 the convenience of the readers for 2001 from euro into U.S. dollars, at an exchange rate of U.S. $0.8901 per €1.00, 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 31, 2001. 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 February 25, 2002, the Noon Buying Rate for the euro was U.S. $0.8713 per €1.00.

FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE

Investors are cautioned that the forward-looking statements contained in this Annual Report involve both risk and uncertainty. Many 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.”

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 2001 and 2000, and the statement of operations data for 2001, 2000 and 1999, 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 data for 1999, 1998 and 1997 and the statement of operations data for 1998 and 1997 are derived from audited Consolidated Financial Statements not included in this Annual Report.

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. Greece became the twelfth member of the EMU on January 1, 2001. The Consolidated Financial Statements for each period ending 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 €1.00. 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.


	Year Ended December 31,

	2001			2001		2000		1999			1998		1997

	(unaudited)			(audited)

	U.S. $⁽¹⁾			€		€		€			€		€

	(in millions, except per share data, percentages and number of employees)

Statement of Operations Data:
Net sales		4,537		5,097		5,207			4,318		4,344		4,951
Cost of sales		(3,933	)	(4,419	)	(4,441	)		(3,621	)	(3,454	)	(3,862	)
Gross profit		604		678		766			697		890		1,089
Selling, general and administrative expenses		(519	)	(583	)	(567	)		(570	)	(535	)	(575	)
Research and development expenses		(85	)	(95	)	(94	)		(79	)	(101	)	(133	)
Special charges⁽²⁾		(472	)	(530	)	(29	)		(559	)	(100	)	(103	)
Operating profit (loss)⁽³⁾		(470	)	(528	)	83			(521	)	168		267
Interest and other income, net⁽⁴⁾		(4	)	(4	)	56			(71	)	(75	)	(83	)
Income tax benefit (provision)		123		138		(84	)		83		(109	)	(83	)
Minority interests		–		–		–			7		(40	)	(63	)
Earnings (loss) from continuing operations		(351	)	(394	)	55			(502	)	(56	)	38
Earnings from discontinued operations		8		9		3			310		12		9
Net earnings (loss)		(343	)	(385	)	58			(207	)	(44	)	47
Earnings (loss) per common share – basic and diluted⁽⁵⁾
Earnings (loss) per common share – basic and diluted⁽⁵⁾		(6.81	)	(7.65	)	1.09			(3.70	)	(0.79	)	0.84
Balance Sheet Data:
Total assets		6,288		7,064		7,642			7,569		7,358		6,185
Debt		784		880		1,165			948		1,479		1,888
Shareholders’ equity⁽⁶⁾		1,967		2,210		2,843			2,866		2,736		1,250
Dividends paid per share⁽⁷⁾		0.36		0.40		0.11			–		–		–
Common stock		127		143		143			143		–		–
Weighted average shares – basic and diluted		50,332		50,332		53,293			55,915		55,915		55,915
Other Data:
Operating margin (%)		(10.36	)	(10.36	)	1.59			(12.07	)	3.87		5.39
Depreciation and amortization of tangible and intangible assets
		372		418		388			339		312		290
Capital expenditures on tangible fixed assets		206		231		235			262		345		368
Trade Working Capital⁽⁸⁾		611		687		993			980		993		1,029
Number of employees on a continuing basis (end of period) in thousands
		11.8		11.8		13.2			14.9		15.8		17.5


(1)	The U.S. $ figures are unaudited and have been translated solely for the convenience of the reader at an exchange rate of U.S. $0.8901 per €1.00, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2001.
(2)	Special charges represent charges for the impairment of assets, litigation charges and restructuring charges, which include employee termination costs, plant and office closures and other costs. See Note 26 to the Consolidated Financial Statements.
(3)	Hoechst acquired substantially all the 49 percent minority interest in its Mexican subsidiary, Grupo Celanese S.A., 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 €30 million, because of the amortization of goodwill associated with the acquisition.
(4)	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.
(5)	Earnings (loss) per common share – basic and diluted is calculated by dividing net earnings (loss) by the weighted average shares outstanding. At December 31, 2001, 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.
(6)	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 €592 million, the contribution of Hoechst receivables amounting to €384 million, the transfer of some other activities from Celanese to Hoechst of €350 million and the recognition of a deferred tax asset in connection with the contribution of the Dyneon equity investment of €109 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.
(7)	See “Item 8. Financial Information – Dividend Policy.”
(8)	Celanese defines trade working capital as trade accounts receivable from 3rd parties and affiliates net of allowance for doubtful accounts, plus inventories, less trade accounts payable to 3rd parties and affiliates.

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. Greece became the twelfth member of the EMU on January 1, 2001. By March 1, 2002, the euro was the sole legal tender of all euro zone countries.

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 January 1, 1999, 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 €1.00. 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.

Year		Low	High	Average	End

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		0.8270	0.9757	0.9231	0.9388
2001
	July	0.8370	0.8797	0.8615	0.8752
	August	0.8775	0.9165	0.9014	0.9090
	September	0.8868	0.9310	0.9114	0.9099
	October	0.8893	0.9181	0.9050	0.8993
	November	0.8770	0.9044	0.8883	0.8958
	December	0.8773	0.9044	0.8912	0.8901
2002
	January	0.8594	0.9031	0.8832	0.8594
	February (through February 25, 2002)	0.8613	0.8778	0.8715	0.8713

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.”

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, political and regulatory 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, political and regulatory conditions.

Conditions such as the uncertainties associated with war, terrorist activities, or political instability in any of the countries in which Celanese operates could affect Celanese by causing delays or losses in the supply or delivery of raw materials and products as well as increased security costs, insurance premiums and other expenses. These conditions could also result in or lengthen economic recession in the United States, Germany, Asia or elsewhere. Moreover, changes in laws or regulations, such as unexpected changes in regulatory requirements (including import or export licensing requirements), or changes in reporting requirements of the United States, German or European Union governmental agencies, could increase the cost of doing business in these regions. Any of these conditions may have an effect on Celanese’s business and financial results as a whole and may result in the volatility of the current and future prices for Celanese shares.

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.

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, butane 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. 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, or Celanese may not be able to capture the benefit of raw material price declines if raw material prices fall to levels below those at which Celanese is committed to purchase under forward purchase contracts. Even in periods during which raw material prices decline, as occurred during 2001, 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.

Celanese’s policy allows the purchase of up to 80 percent of its natural gas and butane requirements, generally up to 18 months forward using forward purchase or cash-settled swap contracts. Throughout 2001 and during the second half of 2000, Celanese entered into forward purchase and cash-settled swap contracts for slightly less than 50 percent of its estimated natural gas requirements, generally for up to three 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.

Failure to develop new products and production technologies or to implement productivity and cost reduction initiatives successfully 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 initiatives 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.”

Stricter environmental, safety and health laws, regulations 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.

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 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.

Changes in environmental, health and safety regulatory requirements could have a significant negative effect on the demand for Celanese’s products

New or revised governmental regulations relating to health, safety and the environment may also affect demand for Celanese’s products.

Various United States programs, including the Voluntary Children’s Chemical Evaluation Program and High Production Volume Chemical Initiative, and various European Commission programs, including the White Paper on Strategy for a Future Chemicals Policy, will potentially require toxicological testing and risk assessments of a wide variety of chemicals, including chemicals used or produced by Celanese.

Pursuant to the European Union regulation on Risk Assessment of Existing Chemicals, the European Chemicals Bureau of the European Commission has been conducting risk assessments on approximately 140 major chemicals. Some of the chemicals initially being evaluated include competitors’ products, such as styrene and 1,3-butadiene, as well as Celanese’s product vinyl acetate monomer or VAM. These risk assessments entail a multi-stage process to determine whether and to what extent the Commission should classify the chemical as a carcinogen and, if so, whether this classification, and related labeling requirements, should apply only to finished products that contain specified threshold concentrations of the chemical. In the case of VAM, a final ruling is not expected for several years. Celanese and other VAM producers are participating in this process with detailed scientific analyses supporting the industry’s position that labeling should not be required but that, if it is, should only be at high concentration levels. Because Celanese and the other VAM producers are in the early stages of the process, it is not possible for Celanese to predict the outcome or effect of any final ruling.

Depending on the outcome of the above-mentioned assessments in the United States and Europe, additional requirements may be placed on the production, handling, labeling or use of the subject chemicals. Such additional requirements could increase the cost incurred by Celanese’s customers to use its chemical products and otherwise limit the use of these products, which could adversely affect the demand for these products.

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 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 fires; 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, 2001 were €1,013 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 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 €250 million;
Hoechst will bear the full amount of those liabilities between €250 million and €750 million; and
Celanese will indemnify Hoechst for one third of those liabilities for amounts exceeding €750 million.

As of December 31, 2001, €20 million had been spent to date by Celanese for environmental contamination liabilities in connection with the divestiture agreements. Celanese has additional reserves of €111 million as of December 31, 2001, 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. Celanese did not make any payments to Hoechst in 2001 in connection with this indemnity.

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 Note 24 to the Consolidated Financial Statements, 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 owned 28.6 percent of the Celanese shares outstanding as of December 31, 2001. Kuwait Petroleum Corporation may have the ability, as a matter of German corporate law, to block some corporate actions by Celanese such as mergers, spin-offs 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. 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.

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.

In 2001, Celanese had net sales of €5,097 million and an operating loss of €528 million from continuing operations. At December 31, 2001, Celanese had approximately 11,800 employees worldwide. Celanese has 30 production plants and five 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 Asia. In 2001, 53 percent of net sales was derived from sales in North America, 37 percent from sales in Europe, 8 percent from sales in Asia and Australia and 2 percent from sales in the rest of the world. Celanese has a large and diverse global customer base consisting principally of major industrial companies. In 2001, sales to the 10 largest customers of Celanese accounted for less than 20 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 €231 million in 2001, €235 million in 2000, and €262 million in 1999. North America, Europe and Asia accounted for 68 percent, 31 percent and 1 percent, respectively, of Celanese’s capital expenditures in 2001. The capital 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 – 2001 Compared to 2000 – Discontinued Operations”, and Note 6 to the Consolidated Financial Statements.

As of December 31, 2001, Celanese had 50,334,891 shares outstanding and approximately 110,000 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 adhesives, building products, paper coatings, films and textiles. 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 food ingredients business, which produces and sells high intensity sweeteners and food protection ingredients.

The table below illustrates each segment’s share of total segment net sales to external customers for the years ended December 31, 2001, 2000 and 1999.

Net Sales to External Customers by Segment


	Year Ended December 31,

	2001				2000				1999

	€	% of Segment⁽¹⁾			€	% of Segment⁽¹⁾			€	% of Segment⁽¹⁾

	(in millions, except percentages)

Acetyl Products	2,062		41	%	2,023		39	%	1,487		35	%
Chemical Intermediates	977		20	%	1,012		20	%	847		20	%
Acetate Products	762		15	%	756		15	%	739		17	%
Technical Polymers Ticona	773		15	%	923		18	%	788		19	%
Performance Products	440		9	%	409		8	%	397		9	%


(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, the innovative products subsidiaries Celanese Ventures GmbH and Celanese Advanced Materials, Inc., companies that provide infrastructure services, and other ancillary businesses. Celanese Advanced Materials, Inc. comprises the high performance polymer, polybenzimidazole or PBI, and the Vectran^®polymer fiber product lines, which were transferred from the Acetate Products segment effective July 1, 2000. See Note 27 to the Consolidated Financial Statements for additional information.

Strategy

In 2001, Celanese made substantial progress in a number of key strategic areas:

Improve business performance through operational excellence:
Celanese is undertaking a number of initiatives to improve performance through productivity and efficiency increases. They include:

“Focus” and “Forward” Initiatives: Celanese exceeded the financial targets set under the “Focus” profit improvement initiative, which commenced in January 2001. The targets for 2001 consisted of reducing trade working capital by €100 million compared to end of year 2000 levels, controlling capital expenditures at or below the year 2000 level of €235 million and a €100 million EBITDA contribution from programs to increase efficiency. At year-end 2001, trade working capital had declined by €306 million and capital expenditures were €231 million compared to €235 million in 2000. EBITDA improvements achieved as a result of cost cutting and efficiency measures were overshadowed by the effects of lower volumes and weak overall market conditions.

The “Forward” initiative was announced at the end of August 2001 and initiated additional restructuring and other measures to reduce costs. The initiative includes the planned closure of high-cost facilities and the simplification of administrative structures.

Under both initiatives, Celanese identified the reduction of approximately 1,600 positions, of which approximately 500 positions had been eliminated by the end of 2001 through the closure of eight high-cost facilities and the streamlining of plant and administrative operations. These initiatives also included closing acetyl production capacity in Canada, streamlining operations at two major Texas facilities, and shutting down a chemical distribution terminal and acetate filament production in South Carolina. These initiatives were all completed by the end of 2001. Celanese expects to realize further cost reductions and operational efficiencies resulting from these programs in 2002.

Continuing Efforts in 2002 to Improve Efficiency and Performance: Early in 2001, Celanese introduced into its chemicals segments Six Sigma, a business process that engages employees in projects that can yield significant revenue and profitability improvements. This process is continuing and is now being applied to many business and administrative functions. The implementation of Six Sigma is accompanied by a business excellence program, the first phase of which is aimed at improving operational processes such as enhancing computerized controls in manufacturing operations to reduce process variability and to maximize production output, as well as optimizing plant maintenance practices to improve reliability. The first phase also includes an integrated performance management system to develop, retain and attract employees. A key component of this program is Celanese’s Talent Review Process, a comprehensive human resources program to identify and develop future leaders.
Portfolio optimization and internal growth:
In its Acetyl Products segment, Celanese intends to continue to selectively consider forward integration opportunities similar to the acquisition in 2000 of the polyvinyl alcohol business of Air Products & Chemicals, Inc. In Ticona, Celanese broke ground in May 2001 for a 30,000 metric ton/year plant to manufacture GUR^®ultra-high molecular weight polyethylene in Bishop, Texas. The new plant will double the GUR capacity in North America and replace the existing plant in Bayport, Texas. Ticona is also significantly increasing the capacity of its Vectra^®liquid crystal polymers plant in Shelby, North Carolina. This expansion, which is scheduled to come on stream by mid-2002, will position Ticona to meet the projected long-term needs of the telecommunications industry and to develop emerging markets. In the food ingredients business of Celanese’s Performance Products segment and the specialties business line of its Chemical Intermediates segment, Celanese is developing new products and services to meet emerging market needs.

Celanese is exploring strategic options, such as joint ventures and other alternatives, to optimize its OPP films business, which is part of the Performance Products segment, and its under-performing oxo and acrylates businesses, which are part of the Chemical Intermediates segment.

Strengthen Celanese’s established global presence:
Celanese is moving ahead with strengthening its position in Asia. At the end of 2001, Celanese and Teijin Limited agreed that Teijin would provide marketing and technical assistance to Celanese, in support of Celanese’s efforts to supply acetate filament to Teijin’s former customers. Teijin plans to close its acetate filament business by the end of the third quarter of 2002. In acetate tow, Celanese is conducting a feasibility study with its Chinese partners to expand production capacity at their joint venture plants in China. In addition, Ticona, along with Polyplastics and Mitsubishi Gas Chemical Company, Inc., has received approval from the Chinese government to form a joint venture, which is planning to build a world-scale polyacetal plant in China.
Enhance leading technology positions:
During 2001, Celanese achieved significant technology improvements in the production of acetic acid and vinyl acetate monomer, Celanese’s two major chemical products. With its new AO Plus™ proprietary acid optimization technology, Celanese expanded its acetic acid capacity at the Clear Lake, Texas, plant by 20 percent to 1.2 million metric tons with minimal capital expenditure. The technology further improves the cost-effectiveness of the plant and can be implemented at other sites when needed. With its VAntage™ technology for vinyl acetate monomer, Celanese is able to significantly increase production efficiencies, further lower operating costs and expand capacity equivalent to a world-scale plant at 10 to 15 percent of the cost of building a new unit. Celanese continues to pursue the development of membrane electrode assemblies for high temperature fuel cells, with plans to build a pilot plant in Germany in 2002.
Generate value-added solutions for customers:
Celanese continues to make process and product improvements that generate value-added solutions for customers. Ticona has developed a new high-precision injection molding process for manufacturing chip carriers using its Vectra^® liquid crystal polymer. This process has made significant advances in the miniaturization, safety and speed of modern IT products, such as mobile phones and electronic control systems for engines and notebook computers. This technology offers considerable advantages to the semiconductor industry, including fewer production steps, reduced weight, greater temperature and dimensional stability, and reliable interconnection density. Nutrinova has successfully offered sweetening solutions for foods and beverages made with Sunett^®, also known as acesulfame-K, a high intensity sweetener. Formulations incorporating Sunett provide a greater sugar-like taste, as well as longer shelf life and a cost savings to the customer for sweetening agents.

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.


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

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.
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.
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 vinyl acetate monomer according to the Tecnon Orbichem’s Acetic Acid and Vinyl Acetate 1999-2009 World Survey. According to 2001 data from Tecnon Orbichem and other sources, Celanese is 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 natural gas, which is purchased from numerous sources; ethylene, which Celanese purchases from multiple suppliers; carbon monoxide, which is both manufactured and purchased by Celanese under long-term contracts; methanol, which is both manufactured and purchased by Celanese under short-term contracts; and butane, which is purchased 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 proprietary acid-optimization technology. Management believes that Celanese’s Clear Lake, Texas and Singapore facilities, which use these technologies, are some of the world’s lowest cost acetic acid plants. In March 2001, Celanese announced an important development in its proprietary acid optimization technology, AO Plus™, for the production of acetic acid. AO Plus was first implemented at Celanese’s Clear Lake plant, enabling a 20 percent increase in capacity with minimal investment required. In July 2001, Celanese announced a significant

improvement in its vinyl acetate monomer technology. The new proprietary technology, VAntage™, will significantly increase production efficiencies, further lower operating costs and increase capacity at 10-15 percent of the cost of building a new plant.

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, an acetate ester that is a solvent used in coatings, inks and adhesives and in the manufacture of, among other things, photographic films and coated papers;
Butyl acetate, an acetate ester that is a solvent used in inks, pharmaceuticals and perfume;
Propyl acetate, an acetate ester that is 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
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, primarily used to produce adhesive resins for plywood, particle board, polyacetal engineering resins and a compound used in making polyurethane;
Polyol products such as pentaerythritol, used in coatings and synthetic lubricants; trimethylolpropane, used in synthetic lubricants; neopentyl glycol, used in powder coatings; and 1,3 butylene glycol, used in flavorings and plasticizers.

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 its acetaldehyde requirements for its North American operations from Petroleos Mexicanos, the Mexican national oil company. Petroleos Mexicanos has been a reliable supplier. Acetaldehyde is also available from other sources.

Polyvinyl Alcohol. Polyvinyl alcohol is a performance chemical engineered to satisfy particular customer requirements. It is used in adhesives, building products, paper coatings, films and textiles. The primary raw material to produce polyvinyl alcohol is vinyl acetate monomer, while acetic acid is produced as a by-product. Prices vary 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. Celanese purchased the polyvinyl alcohol business line from Air Products and Chemicals, Inc. in September 2000.

Facilities

The Acetyl Products segment has production sites in the United States, Canada, Mexico, Singapore, Spain and Germany. Celanese also participates in a joint venture in Saudi Arabia which produces methanol and MTBE. Over the last few years, Celanese has continued to shift its production capacity to lower cost production facilities while expanding in growth markets. An example of this is Celanese’s shut down of its vinyl acetate monomer, acetic acid and pentaerythritol production units in Edmonton, Alberta, Canada. The pentaerythritol unit was shut down at the end of 2001, while the vinyl acetate monomer and acetic acid units were shut down in early 2002. Customers who purchased acetic acid or vinyl acetate monomer from the Edmonton facility will be supplied from the Clear Lake, Texas plant. Customers who purchased pentaerythritol from the Edmonton facility will be supplied from the Bishop, Texas plant.

Capital Expenditures

The Acetyl Products segment’s capital expenditures for property, plant and equipment were €43 million, €80 million, and €127 million for the years 2001, 2000 and 1999, respectively. The capital expenditures incurred during these years related to efficiency and safety improvement-related items associated with the normal maintenance of the business, while the capital expenditures incurred during 1999 and 2000 also related to the construction of the acetic acid and acetate esters plants at Celanese’s Singapore site.

Markets

The following table illustrates net sales by destination of the Acetyl Products segment by geographic region for the years ended December 31, 2001, 2000 and 1999.

Net Sales by Destination – Acetyl Products

	Year Ended December 31,

	2001			2000			1999

	€	% of Segment		€	% of Segment		€	% of Segment

	(in millions, except percentages)

North America	996		48%	1,021		50%	753		51%
Europe/Africa	678		33%	650		32%	473		32%
Asia/Australia	323		16%	300		15%	224		15%
Rest of World	65		3%	52		3%	37		2%

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 Chemical, Inc., BP p.l.c. (“BP”), 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.

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.


		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

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.

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 in the production of polyols, alcohols, safety glass and fabric coatings, and as an intermediate for 2-ethylhexanol and butanol;
Propionaldehyde, used in the manufacture of propanol, the synthesis of fertilizers, and in flavor and fragrance chemicals; and
2-ethylhexanol, used as an intermediate for plasticizers and fuel additives, and in the production of 2-ethylhexyl acrylate, which in turn is used to manufacture water based resins for paint, textiles and paper coatings.

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 or 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 world market suppliers based on international prices.

Facilities

The Chemical Intermediates segment has production sites in the United States, Germany and Mexico. In addition, Celanese operates acrylic acid and acrylate esters units at a plant located in Böhlen, Germany that is owned by Dow. Through long term supply arrangements, Celanese participates in approximately 50 percent of the Böhlen plant’s output.

Capital Expenditures

The Chemical Intermediates segment’s capital expenditures for property, plant and equipment were €30 million, €40 million, and €46 million for the years 2001, 2000 and 1999, respectively. Capital expenditures in all three years related to efficiency and safety improvement-related items associated with the normal maintenance of the business. The capital expenditures incurred in 1999 also included expenditures related to low cost incremental expansions made in response to product demand. 2001 capital expenditures also included spending for a new plant for synthesis gas, an important raw material for the production of oxo and specialties, at Celanese’s Oberhausen site. The new plant is scheduled to come on stream in the second half of 2003 and will allow Celanese to considerably reduce its production costs.

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, 2001, 2000 and 1999.

Net Sales by Destination – Chemical Intermediates

	Year Ended December 31,

	2001			2000			1999

	€	% of Segment		€	% of Segment		€	% of Segment

	(in millions, except percentages)

North America	494		51%	494		49%	469		55%
Europe/Africa	355		36%	378		37%	302		36%
Asia/Australia	100		10%	117		12%	60		7%
Rest of World	28		3%	23		2%	16		2%

Celanese’s acrylates business line serves a broad customer base across several end uses and regions. Due to the consolidation of superabsorbent polymer manufacturers with other acrylates producers, Celanese is shifting its focus to other areas of the acrylates market, where there are growing needs for acrylate esters’ performance characteristics and increased potential for substituting acrylate esters with competing products. Both the acrylates and the oxo markets are 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 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.


	Key Acetate Products			Major Markets

	Acetate Filament			Fashion Apparel, Linings and Home Furnishings

	Acetate Tow			Cigarette Filters

Business Lines

Products from the two major business lines are found in fashion apparel, linings and home furnishings and cigarette filters. Celanese is one of the world’s leading producers 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 that is made from reforested trees from major suppliers and produces acetic anhydride 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. Fashion changes, such as the trend to casual office wear, have negatively affected demand for lining and shell material. In addition, market conditions in North America and Asia have significantly affected the 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 trousers.

Celanese and Teijin’s plans to form a 50-50 joint venture to supply the Asian market with acetate filament were discontinued as a result of a further weakening in the Asian market for filament. Teijin announced plans to close its acetate filament business by the end of the third quarter of 2002. Teijin has agreed to assist Celanese with qualifying its acetate filament for use by Teijin’s former customers beginning in January 2002, by, among other things, providing Celanese with marketing and technical support.

The acetate filter products business line produces acetate tow, which is used primarily in cigarette filters. Currently, the acetate tow market is characterized by oversupply, and projected demand growth is low.

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. Additionally, Celanese sells cellulose acetate tow to the state-owned tobacco enterprises. 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 in China for filtered cigarettes has slowed significantly. However, as demand for acetate tow in China exceeds local supply, Celanese and its Chinese partners are evaluating expansion of their manufacturing joint ventures by 50 percent. Increases in manufacturing capacity of the joint ventures would likely reduce the volume of Celanese’s direct sales of cellulose acetate tow to China, but the dividends paid by the joint ventures to Celanese should increase. A decision on expansion is expected in 2002.

The Acetate Products segment is continuing its cost reduction and operations improvement efforts. These efforts are directed toward reducing costs while achieving higher productivity of employees and equipment. Celanese is taking major steps to restructure its acetate products businesses as part of its strategy to maximize its global manufacturing efficiency. In 2001, these steps included the following actions:

The Rock Hill, South Carolina acetate filament production was shut down at the end of the fourth quarter, with acetate filament production being shifted to the Narrows, Virginia plant. The Rock Hill site will continue to produce acetate flake.
Most of the Lanaken, Belgium acetate filament production was shut down at the end of the fourth quarter. The shut down will be completed by the end of the first quarter of 2002. The Lanaken site will continue to produce acetate tow.
Manufacturing costs at the Ocotlán, Mexico facility were reduced through downsizing and renegotiation of the collective bargaining agreements with employees.

In 2000, Celanese shut down its Drummondville, Canada acetate filament facility and its acetate flake production in Ocotlán, Mexico in the first and third quarters, respectively.

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 €35 million, €30 million, and €30 million for the years 2001, 2000 and 1999, respectively. The capital expenditures incurred during these years related to the relocation of the acetate filament production within North America, as well as 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 Acetate Products segment by geographic region for the years ending December 31, 2001, 2000 and 1999.

Net Sales by Destination – Acetate Products

	Year Ended December 31,

	2001			2000			1999

	€	% of Segment		€	% of Segment		€	% of Segment

	(in millions, except percentages)

North America	253		33%	312		41%	303		41%
Europe/Africa	269		35%	224		30%	155		21%
Asia/Australia	218		29%	197		26%	236		32%
Rest of World	22		3%	23		3%	45		6%

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 North America and Asia have reduced profitability in the global textile industry, 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 worldwide continue to have an unfavorable impact on the business’ operating results.

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. 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 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. The following table lists key Ticona products, their trademarks, and their major markets.


	Key Ticona Products			Major Markets

	Hostaform^®/Celcon^®(Polyacetals)			Automotive, Electronics and Consumer Products

	GUR^® (Ultra High Molecular Weight Polyethylene or PE-UHMW)			Profiles, Battery Separators and Industrial Specialties

	Celanex^®/Vandar^® (Polyester Engineering Resins)			Electrical, Electronics, Automotive, Appliances and Consumer Products

	Vectra^®(Liquid Crystal Polymers)			Electronics, Telecommunications and Automotive

	Fortron^®* (Polyphenylene Sulfide or PPS)			Electronics, Automotive and Industrial

	Celstran^®, Compel^®(long fiber reinforced thermoplastics)			Automotive and Industrial

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 is also developing new products such as Topas^®, a metallocene catalyst based cycloolefin copolymer, or COC. Topas is in the initial marketing stage for applications where transparency, high temperature resistance and gas barrier properties are key requirements.

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 and Korean Engineering Plastics, in which Ticona holds 45 and 50 percent ownership interests, respectively, are leading suppliers of polyacetals and other engineering resins in the Asia/Pacific region. 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. The basic raw material for GUR is ethylene, a widely available commodity chemical with cyclical pricing.

Polyesters such as Celanex^® polybutylene terephthalate, or PBT, and Vandar^®, a series of PBT-polyester blends, 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™ polyethylene terephthalate, or PET, is a polyester which exhibits rigidity and strength useful in large injection molded part applications, as well as high temperature resistance in automotive or electrical/electronic applications. Riteflex^® 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^®, are used in electrical and electronics applications and for precision parts with thin walls and complex shapes. Fortron^®, a polyphenylene sulphide, or PPS, product, is used in a wide variety of automotive and other applications, especially those requiring heat and/or chemical 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, Ticona’s 50-50 joint venture with Kureha Chemicals Industry of Japan. Celstran^® and Compel^® 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^®, 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 €97 million, €58 million, and €40 million for the years 2001, 2000 and 1999, 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 the second half of 2002. Ticona is also significantly increasing the capacity of its Vectra^® LCP plant in Shelby, North Carolina. This expansion, which is scheduled to come on stream by mid-2002, will add two reactors to the two already in place, and will position Ticona to meet the projected long-term needs of the telecommunications industry and to develop and grow emerging markets.

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, 2001, 2000 and 1999.

Net Sales by Destination – Technical Polymer Ticona Segment

	Year Ended December 31,

	2001			2000			1999

	€	% of Segment		€	% of Segment		€	% of Segment

	(in millions, except percentages)

North America	420		54%	518		56%	438		56%
Europe/Africa	317		41%	360		39%	314		40%
Asia/Australia	14		2%	22		2%	19		2%
Rest of World	22		3%	23		3%	17		2%

Ticona’s consolidated net sales do not include the sales of Polyplastics, Korean Engineering Plastics or Fortron Industries, which are accounted for under the equity method. If Ticona’s portion of the sales made by these businesses were included in the chart above, the percentage of sales sold in Asia/Australia would increase substantially. 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. If there is a significant swing in the economic conditions of the end markets of Ticona’s principal customers, it can significantly affect the demand for Ticona’s products. This was apparent in 2001, when the downturn in the telecommunications and U.S. automotive industries negatively affected sales volumes of Ticona’s products.

Competition

Ticona’s principal competitors include BASF, Bayer AG, DuPont and General Electric Company. Smaller regional competitors include Asahi/America, Inc., DSM NV, Honeywell International Inc., Mitsubishi Plastics, Inc., Rhodia, Chevron Phillips Chemical Company, L.P., 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.


	Key Performance Products			Major Markets

	OPP Films			Packaging, Labeling and Electrical Engineering (Capacitors)

	Sunett^®(Acesulfame-K)			Beverages, Confections, Dairy Products and Pharmaceuticals

	Sorbates			Dairy Products, Baked Goods, Beverages, Animal Feeds, Spreads and Delicatessen Products

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 worldwide OPP films business and has a leading position in Europe. Its OPP films are made from very pure polypropylene granules. The films are oriented, high strength films which are very thin, ranging from 3.5µm (0.0035 mm) to 100µm (0.1 mm), 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’ 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 the production and sale of high intensity sweeteners and food protection ingredients, such as sorbic acids and sorbates, as well as the resale of dietary fiber products worldwide and the resale of other food ingredients in Japan and Australia.

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. Nutrinova’s food protection ingredients are used in foods, beverages and personal care products.

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. 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. Nutrinova has production facilities in Germany.

Capital Expenditures

The Performance Products segment’s capital expenditures for property, plant and equipment were €16 million, €18 million, and €12 million for the years 2001, 2000 and 1999, respectively. The capital expenditures incurred during these years related to efficiency and safety improvement items associated with the normal maintenance of the business. In addition, capital expenditures incurred during 2000 and 2001 also included spending relating to the relocation of the OPP film production from Swindon, UK to Mantes-la-Ville, France.

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, 2001, 2000 and 1999.

Net Sales by Destination – Performance Products

	Year Ended December 31,

	2001			2000			1999

	€	% of Segment		€	% of Segment		€	% of Segment

	(in millions, except percentages)

North America	125		28%	127		31%	111		28%
Europe/Africa	256		58%	252		62%	233		59%
Asia/Australia	33		8%	12		3%	11		3%
Rest of World	26		6%	18		4%	42		10%

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 the manufacture of films for higher value market segments and 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.

Competition

Principal competitors of Trespaphan are AET Inc., Exxon Mobil Corporation, and UCB Films. Nutrinova’s principal competitors Sunett are Holland Sweetener Company, The Nutrasweet Company, Ajinomoto Co., Inc. and several Chinese manufacturers. For sorbates, Nutrinova competes with Nantong AA, Daicel, Chisso Corporation and several other Japanese and Chinese manufacturers for sorbates.

Other Activities

Other Activities includes revenues mainly from the captive insurance companies, Celanese Ventures GmbH, Celanese Advanced Materials, Inc., as well as several service companies and other ancillary businesses, which do not have significant sales. Celanese Ventures promotes research projects that lie outside of Celanese’s principal businesses or, due to their long-term perspective and widely spread application possibilities, cannot be operated by the principal businesses alone. Celanese Ventures is presently active in developing membrane electrode units for fuel cells, innovative food ingredients, and new catalysts for high performance polymers. Celanese Advanced Materials comprises the high performance polymer PBI and the Vectran^®polymer fiber product lines, which were transferred from the Acetate Products segment to Other Activities as of July 1, 2000 to reflect the strategic alignment of PBI with Celanese Ventures’ fuel cell project. See Note 27 to the Consolidated Financial Statements.

Acquisitions and Divestitures

For information on acquisitions and divestitures, see “Item 5. Operating and Financial Reviews and Prospects – Summary of Consolidated Results – 2001 Compared with 2000 – Discontinued Operations” and Note 6 to the Consolidated Financial Statements.

eBusiness

As the B2B marketplace continues to evolve, Celanese’s goal is to use the advantages of the internet and eBusiness as an integral part of its business strategies. To accomplish this objective, Celanese’s strategy is to:

Pursue operational excellence within the businesses that will improve efficiencies and create new value propositions for their strategic market segments;
Mobilize and energize the whole Celanese organization to understand and exploit the advantages of eBusiness;
Invest in eBusiness opportunities that support Celanese’s strategic objectives and enhance shareholder value; and
Participate in specific eBusiness ventures that facilitate the integration of Celanese’s value chain, develop best practices in eBusiness, and expand Celanese’s knowledge of eBusiness models and technology.

Celanese has reinforced its long-standing commitment to meeting customer needs by offering a network of services including Ticona Buy Direct^®, ChemVIP, and by participating in various industry eBusiness platforms, such as Elemica and Omnexus.

Raw Materials and Energy

Celanese purchases a variety of raw materials for use in its production processes. Celanese has a policy of maintaining, when available, multiple sources of supply for materials. Although some of Celanese’s individual businesses may have single suppliers for some of their raw materials, Celanese is not dependent on a limited number of suppliers for essential raw materials. Celanese obtains its supplies of raw materials from a number of countries. During the second half of 2000 and the first quarter of 2001, Celanese experienced problems with a supplier who was unable to deliver a reliable and consistent supply of carbon monoxide at Celanese’s Singapore facility. This problem was resolved during the first quarter of 2001. Otherwise, Celanese has not experienced difficulty in obtaining sufficient supplies of raw materials in recent years. However, there can be no assurance that Celanese’s ability to obtain sufficient raw materials will not be adversely affected by unforeseen developments. In addition, the price of raw materials varies, often substantially, from year to year.

Celanese’s production facilities rely largely on coal, fuel oil, natural gas and electricity for energy. Coal prices in the United States rose significantly during 2001, but leveled off at the end of the year. Natural gas prices continued an upward trend through the first quarter of 2001, but declined throughout the remainder of the year. With respect to Celanese’s European operations, most of these raw materials are centrally purchased by a special purpose subsidiary of Celanese which also buys raw materials on behalf of third parties. Otherwise, these raw materials and energy are predominantly purchased directly by Celanese’s operating businesses. Celanese’s policy allows the purchase of up to 80 percent of its natural gas and butane requirements generally up to 18 months forward using forward purchase or cash-settled swap contracts. Throughout 2001 and during the second half of 2000, Celanese entered into forward purchase and cash-settled swap contracts for slightly less than 50 percent of its estimated natural gas requirements, generally for up to three to six months forward.

Research and Development

All of Celanese’s businesses conduct research and development activities to increase competitiveness. Celanese’s Technical Polymers Ticona and Performance Products segments in particular are innovation-oriented businesses that conduct research and development activities to develop new, and optimize existing, production technologies, as well as to develop commercially viable new products and applications.

The Acetyl Products and Chemical Intermediates segments have been focusing on improving core production technologies, such as improving catalyst development, and supporting both debottlenecking and cost reduction efforts. New business opportunities for amines and oxo derivatives are developed in conjunction with research and development support from the Oberhausen, Germany technical center. As a part of Celanese’s “Forward” initiative, the Acetyl Products and Chemical Intermediates segments will relocate their research and development functions in the United States to the Bishop, Texas and Clear Lake, Texas plants. The research and development groups will be relocated during the second half of 2002 after the completion of a new building at the Clear Lake plant. Celanese

believes that relocating the research function closer to the manufacturing facilities will result in a further increase of productivity.

The Acetate Products segment has been focusing on developing new fabrics using acetate filament and new applications for other acetate materials, such as their use in disposable consumer and decorative materials. The Acetate Products segment actively files patent applications worldwide for these new applications.

Research in the Technical Polymers Ticona segment is focused on the development of new formulations and applications for its products, improved manufacturing processes and new polymer materials with varying chemical and physical properties in order to meet customer needs and to generate growth. This effort involves the entire value chain from new or improved monomer production, polymerization and compounding, to working closely with end-users to identify new applications that can take advantage of these high performance features. Ticona is continually improving compounding recipes to extend product properties and grades, while offering grade consistency on a global basis. In addition, Ticona is developing new polymerization and manufacturing technology in order to meet economic and ecological goals without sacrificing high quality processing.

The research and development activities of the Performance Products segment are conducted separately by the two businesses, Trespaphan and Nutrinova. Trespaphan’s research and development activities in Neunkirchen, Germany and Mantes, France, are focused on the development of new film types for established and new applications. Trespaphan also has focused on improving its manufacturing processes in order to maintain cost competitiveness as well as high quality for its film products. Nutrinova’s research and development activities in Frankfurt, Germany are directed towards expanding its existing technologies and developing new applications for existing products in close cooperation with its customers.

The research and development activities of Celanese’s innovative products subsidiary, Celanese Ventures GmbH, focus on promoting research projects that lie outside of Celanese’s core businesses or are in an early stage of development. Presently, Celanese Ventures is developing and marketing membrane-electrode assemblies for high temperature fuel cells, and innovative food ingredients such as polyunsaturated fatty acids, based on a biotechnological process. Another area of competency is high performance catalysts. Celanese Ventures captures the value of promising technologies with licensing and development agreements, as well as by selling to strategic investors those projects that no longer fit Celanese’s long term goals. Celanese Ventures operates research and development and pilot manufacturing facilities in Frankfurt, Germany; Summit, New Jersey; and Charlotte, North Carolina.

Research and development costs are included in expenses as incurred. Celanese’s research and development costs for 2001, 2000 and 1999 were €95 million, €94 million and €79 million, respectively. For additional information on Celanese’s research and development expenses, see “Item 5. Operating and Financial Review and Prospects – Summary of Consolidated Results – 2001 Compared with 2000.”

Intellectual Property

Celanese attaches great importance to patents, trademarks, copyrights and product designs in order to protect its investment in research and development, manufacturing and marketing. Celanese’s policy is to seek the widest possible protection for significant product developments in its major markets. Patents may cover products, processes, intermediate products and product uses. Protection for individual products extends for varying periods in accordance with the date of patent application filing and the legal life of patents in the various countries. The protection afforded, which may also vary from country to country, depends upon the type of patent and its scope of coverage. In most industrial countries, patent protection exists for new substances and formulations, as well as for unique applications and production processes. Celanese monitors its competitors and vigorously challenges patent and trademark infringement. For example, Nutrinova maintains a strict patent enforcement strategy, which has resulted in favorable outcomes in a number of patent infringement matters in Europe and the United States. Nutrinova is currently pursuing a number of matters relating to the infringement of its Sunett^® acesulfame-K patents. Nutrinova’s European and U.S. patents for making Sunett expire in 2005.

As patents expire, the products and processes described and claimed in those patents become generally available for use by the public. Celanese believes that the loss of no single patent which may expire in the next several years will materially adversely affect the business or financial results of Celanese.

Celanese also seeks to register trademarks extensively as a means of protecting the brand names of its products, which brand names become more important once the corresponding patents have expired. Celanese protects its trademarks vigorously against infringement and also seeks to register design protection where appropriate.

Environmental and Other Regulation

Obtaining, producing and distributing many of Celanese’s products involves the use, storage, transportation and disposal of toxic and hazardous materials. Celanese is subject to extensive, evolving and increasingly stringent national and local environmental laws and regulations, which address, among other things, the following:

Emissions to the air;
Discharges to surface and subsurface waters;
Other releases into the environment;
Generation, handling, storage, transportation, treatment and disposal of waste materials;
Maintenance of safe conditions in the workplace; and
Production, handling, labeling or use of chemicals used or produced by Celanese.

Celanese is subject to environmental laws and regulations that may require it to remove or mitigate the effects of the disposal or release of chemical substances at various sites. Under some of these laws and regulations, a current or previous owner or operator of property may be held liable for the costs of removal or remediation of hazardous substances on, under, or in its property, without regard to whether the owner or operator knew of, or caused the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time they occurred. As many of Celanese’s production sites have an extended history of industrial use, it is impossible to predict precisely what effect these laws and regulations will have on Celanese in the future. As is typical for chemical businesses, soil and groundwater contamination has occurred in the past at some Celanese sites, and might occur or be discovered at other sites.

It is Celanese’s policy to comply with all environmental, health and safety requirements and to provide safe and environmentally sound workplaces for employees. In some cases, compliance can be achieved only by incurring capital expenditures. For example in 2001, various draft regulations under consideration in the United States, including the Houston, Texas area’s State Implementation Plan (air regulations), and various approaches to regulating boilers and incinerators could impose additional requirements on Celanese’s operations. Celanese’s worldwide expenditures in 2001, including those with respect to third party and divested sites, for compliance with environmental control regulations and internal company initiatives totaled €106 million, of which €8 million was for capital projects. It is anticipated that stringent environmental regulations will continue to be imposed on Celanese and the industry in general. Although Celanese cannot predict with certainty future expenditures, management believes that the current spending trends will continue.

Other new or revised regulations may place additional requirements on the production, handling, labeling or use of some chemical products. Various United States programs, including the Voluntary Children’s Chemical Evaluation Program and High Production Volume Chemical Initiative, and various European Commission programs, including the White Paper on Strategy for a Future Chemicals Policy, will potentially require toxicological testing and risk assessments of a wide variety of chemicals, including chemicals used or produced by Celanese.

Pursuant to a European Union regulation on Risk Assessment of Existing Chemicals, the European Chemicals Bureau of the European Commission has been conducting risk assessments on approximately 140 major chemicals. Some of the chemicals initially being evaluated include competitors’ products, for instance styrene and 1,3-butadiene, as well as Celanese’s product vinyl acetate monomer or VAM. These risk assessments entail a multistage process to determine whether and to what extent the Commission should classify the chemical as a carcinogen and, if so, whether this classification, and related labeling requirements, should apply only to finished products that contain specified threshold concentrations of the chemical. In the case of VAM, a final ruling is not expected for several years. Celanese and other VAM producers are participating in this process with detailed scientific analyses supporting the industry’s position that labeling should not be required but, if it is, should only be at high concentration levels. Because Celanese and the other VAM producers are in the early stages of the process, it is not possible for Celanese to predict the outcome or effect of any final ruling.

Celanese is subject to claims brought by United States federal or state regulatory agencies or private individuals regarding the clean-up of sites that Celanese owns, owned, operated or where waste from its operations was disposed. In particular, Celanese has a potential liability under the United States Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, commonly known as Superfund, the United States Resource Conservation and Recovery Act, and related state laws for investigation and clean-up costs at approximately 100 sites. At most of these sites, numerous companies, including Celanese, or one of its predecessor companies, have been notified that the Environmental Protection Agency or EPA, state governing body or private individuals consider such companies to be potentially responsible parties under Superfund or related laws. The proceedings relating to these sites are in various stages. The clean-up process has not been completed at most sites, and the status of the coverage under some insurance policies for many of these proceedings is in litigation. Celanese regularly reviews the liabilities for these sites and has accrued its best estimate of its ultimate liability for investigation or clean-up costs, but, due to the many variables involved in such estimation, the ultimate liability may vary from these estimates. Expenditures for investigation, clean-up and related activities have been €6 million for the three years ended December 31, 2001, with expenditures in no year greater than €3 million.

Celanese’s wholly-owned subsidiary, InfraServ Verwaltungs GmbH, is the general partner of the InfraServ companies that provide on-site general and administrative services at German sites in Frankfurt am Main-Höchst, Gendorf, Hürth-Knapsack, Wiesbaden, Oberhausen and Kelsterbach. Producers at the sites, including subsidiaries of Celanese, are owners of limited partnership interests in the respective InfraServ companies. Effective January 1, 2001, Celanese sold its limited partnership interest in InfraServ GmbH & Co. Münchsmünster KG, the company that owns the production site in Münchsmünster, to Ruhr Oel GmbH. Celanese did not record a gain or loss on the sale of this limited partnership interest. On February 21, 2002, Celanese received approval from the German merger control authorities to sell its interest in InfraServ GmbH & Co. Deponie Knapsack KG, or Deponie, to Trienekens AG, a company active in all areas of waste management and majority owned by RWE AG, one of Germany’s largest utility companies. In the transaction, Deponie’s financial assets, including a cash reserve of €58 million required to be held in reserve by the German authorities to support landfill and land reclamation activities, receivables, as well as all Deponie’s liabilities (including those corresponding to the cash reserve) will be transferred to the buyer upon closing of the sale. Celanese expects to record a book gain of approximately €6 million on the sale of the limited partnership interest in Deponie upon closing of the transaction which is scheduled for March 2002.

The InfraServ companies are liable for any residual contamination and other pollution because they own the real estate on which the individual facilities operate. In addition, Hoechst, as the responsible party under German public law, is liable to third parties for all environmental damage that occurred while it was still the owner of the plants and real estate. However, the InfraServ companies have agreed to indemnify Hoechst from any environmental liability arising out of or in connection with environmental pollution of any InfraServ site. The partnership agreements provide that, as between the limited partners, each limited partner is responsible for any contamination caused predominantly by such partner. The limited partners have also undertaken to indemnify Hoechst against such liabilities. Any liability that cannot be attributed to an InfraServ partner and for which no third party is responsible, is required to be borne by the InfraServ company in question. In view of this potential obligation to eliminate residual contamination, the InfraServ companies have recorded provisions totaling approximately €259 million as of December 31, 2001. Of this amount, the €58 million reserve related to Deponie, discussed above, was included in the consolidated reserves for environmental liabilities of Celanese. If the InfraServ companies default on their respective indemnification obligations to eliminate residual contamination, the limited partners in the InfraServ companies have agreed to fund such liabilities, subject to a number of limitations. To the extent that any liabilities are not satisfied by either the InfraServ companies or the limited partners, these liabilities are to be borne by Celanese in accordance with the Demerger Agreement. As between Hoechst and Celanese, Hoechst has agreed to indemnify Celanese for two-thirds of these demerged residual liabilities.

Some of Celanese’s facilities in Germany are over 100 years old, and there may be significant contamination at these facilities. Consistent with German law and with agreements with the relevant governmental entities, Celanese is addressing the issue of potential contamination at its German facilities. With respect to German sites, Celanese records a provision for environmental matters when it is obligated by law, through irrevocable agreements with governmental authorities or through firm commitments, to remediate the facilities.

Provisions are not recorded for potential soil contamination liability at facilities still under operation, as German law does not currently require such contamination to be remedied until the facility is closed and dismantled, unless the authorities otherwise direct. If Celanese were to terminate operations at one of its facilities or if German law were changed to require such removal or clean-up, the cost could be material to Celanese. Celanese cannot accurately determine the ultimate potential liability for investigation and clean-up at such sites. Celanese adjusts provisions as new remedial commitments are made. See Note 25 to the Consolidated Financial Statements.

It is difficult to estimate the future costs of environmental protection and remediation because of many uncertainties, including uncertainties about the status of laws, regulations and information related to individual locations and sites. Subject to the foregoing, but taking into consideration Celanese’s experience to date regarding environmental matters of a similar nature and facts currently known, Celanese believes that capital expenditures and remedial actions to comply with existing laws governing environmental protection will not have a material adverse effect on Celanese’s business and financial results. Celanese has reserved, as of December 31, 2001, €341 million for environmental matters.

In the Demerger Agreement, Celanese agreed to indemnify Hoechst against environmental liabilities for environmental contamination that could arise under some divestiture agreements regarding chemical businesses, participations or assets that were entered into by Hoechst prior to the demerger. Celanese and Hoechst have agreed that Celanese will indemnify Hoechst against those liabilities up to an amount of €250 million. Hoechst will bear those liabilities exceeding €250 million, but Celanese will reimburse Hoechst for one-third of those liabilities for amounts that exceed €750 million. As of December 31, 2001, Celanese had spent €20 million for environmental contamination liabilities in connection with the divestiture agreements. Celanese has additional reserves of €111 as of December 31, 2001 for this contingency and may be required to record additional reserves in the future. See Notes 5 and 25 to the Consolidated Financial Statements.

Celanese believes it is in substantial compliance with all environmental, health and safety laws and regulations and continues to devote attention to the health and safety of its employees and the protection of the public health and the environment in the regions where it operates. Such compliance has not had an adverse effect on Celanese’s competitive position or business. Celanese cannot predict the effect of regulations that may be adopted in the future by governmental bodies responsible for air, water and solid waste pollution controls and employee and community health and safety.

Organizational Structure

Significant Subsidiaries

Celanese AG operates its global businesses through subsidiaries in Europe, North America and Asia, most of which are owned indirectly through a German holding company and wholly-owned subsidiary, Celanese Holding GmbH. Celanese Chemicals Europe GmbH and Ticona GmbH are owned directly by Celanese AG. In North America, many of the businesses are consolidated under Celanese Americas Corporation, a wholly-owned subsidiary which, through its wholly-owned subsidiary, CNA Holdings, Inc., directly or indirectly owns the North American operating companies. The table below sets forth Celanese’s significant subsidiaries:

Name of Company	Country of Incorporation	Percentage Owned

Celanese Canada Inc.	Canada	100.00%

Celanese Chemicals Europe GmbH	Germany	100.00%

Celanese Holding GmbH	Germany	100.00%

Nutrinova Nutrition Specialties & Food Ingredients GmbH	Germany	100.00%

Ticona GmbH	Germany	100.00%

Celanese Far East Ltd.	Hong Kong	100.00%

Grupo Celanese SA	Mexico	99.88%

Celanese Singapore Pte. Ltd.	Singapore	100.00%

Celanese Chemicals Iberica SL	Spain	100.00%

Celanese Acetate LLC	USA	100.00%

Celanese Americas Corporation	USA	100.00%

Celanese Ltd.	USA	100.00%

CNA Holdings, Inc.	USA	100.00%

Ticona Polymers, Inc.	USA	100.00%

Description of Property

Celanese’s principal executive offices are located in Kronberg/Taunus, Germany.

As of December 31, 2001, Celanese had numerous production and manufacturing facilities throughout the world. Celanese also owns or leases other properties, including office buildings, warehouses, pipelines, research and development facilities and sales offices.

The following table sets forth a list of the principal production, manufacturing and other facilities of Celanese throughout the world.

Corporate Center

Site	Leased/Owned	Products/Function

Kronberg/Taunus, Germany	Leased	Administrative offices


Acetyl Products

Site	Leased/Owned	Products/Function

Bay City, Texas, USA	Owned	Butyl acetate
		Iso-butylacetate
		Propylacetate
		Vinyl acetate monomer

Bishop, Texas, USA	Owned	Formaldehyde
		Methanol
		Pentaerythritol
		Polyols

Calvert City, Kentucky, USA	Owned	Polyvinyl alcohol

Cangrejera, Veracruz, Mexico	Owned	Acetic anhydride
		Acetone derivatives
		Ethyl acetate
		Vinyl acetate monomer

Clear Lake, Texas, USA	Owned; the methanol operation	Acetic acid
	of this facility is owned by a	Methanol⁽¹⁾
	joint venture	Vinyl acetate monomer

Edmonton, Alberta, Canada	Owned	Formaldehyde
		Methanol

Frankfurt am Main, Germany	Owned by InfraServ GmbH & Co.	Acetaldehyde
	Höchst KG in which Celanese	Butyl acetate
	holds a 31.2 percent limited	Vinyl acetate monomer
	partnership interest

Pampa, Texas, USA	Owned	Acetic acid
		Acetic anhydride
		Ethyl acetate
		Methyl ethyl ketone

Pasadena, Texas, USA	Owned	Polyvinyl Alcohol

Jurong Island, Singapore	Owned	Acetic acid
		Butyl acetate
		Ethyl acetate
		Vinyl acetate monomer

Tarragona, Spain	Owned by Complejo Industrial Taqsa AIE, holds a 15.0 percent share.	Vinyl acetate monomer

(1)

The decision to manufacture methanol at the Clear Lake plant is evaluated periodically, depending on market conditions.


Chemical Intermediates

Site	Leased/Owned	Products/Function

Bay City, Texas, USA	Owned	Carboxylic Acids
		n/i-Butyraldehyde
		Butyl Alcohols
		Propionaldehyde
		Propyl Alcohols

Bucks, Alabama, USA	Owned	Amines

Cangrejera, Veracruz, Mexico	Owned	Methyl acrylate
		Acrylic acid
		Methyl amines

Clear Lake, Texas, USA	Owned	Acrylic Acid
		Ethyl acrylate
		n-butyl acrylate

Oberhausen, Germany	Owned by InfraServ GmbH & Co.	Butanol
	Oberhausen KG in which Celanese	Dioctyl Phthalate
	holds an 84.0 percent limited	2-Ethyl hexl acrylate
	partnership interest	n/i-Butyraldehyde
		Propanol

Pampa, Texas, USA	Owned	2-Ethyl hexyl acrylate
		Methyl acrylate

Acetate Products

Site Leased/Owned Products/Function

Edmonton, Alberta, Canada Owned Tow

Lanaken, Belgium Owned Tow

Narrows, Virginia, USA Owned Tow, Filament

Ocotlán, Jalisco, Mexico Owned Tow, Filament

Rock Hill, South Carolina, USA Owned Flake


Technical Polymers Ticona

Site	Leased/Owned	Products/Function

Auburn Hills, Michigan, USA	Leased	Automotive Development Center

Bayport, Texas, USA	Leased	GUR^®

Bishop, Texas, USA	Owned	Celanex
		Nylon
		Polyacetal

Florence, Kentucky, USA	Owned	Compounding

Kelsterbach, Germany	Owned by InfraServ GmbH & Co.	Celstran^®
	Kelsterbach KG in which Celanese	Polyacetal
	holds a 100.0 percent limited
	partnership interest

Oberhausen, Germany⁽²⁾	Owned by InfraServ GmbH & Co.	GUR
	Oberhausen KG in which Celanese	Norbornene
	holds an 84.0 percent limited	Topas^®
	partnership interest

Shelby, North Carolina, USA	Owned	LCP
		PBT
		PPS
		Compounding

Telford, UK	Leased	Compounding

Wilmington, North Carolina,	Leased by a joint venture in which	Fortron^®
	Celanese has a controlling interest

Winona, Minnesota, USA	Owned	Celstran

(2)

Technical Polymers Ticona’s plant for its Topas cycloolefin copolymer in Oberhausen, Germany commenced production in September 2000. As Topas continues to undergo market development, the plant is operating at significantly less than commercial capacity. For further information on Topas, see “Information on the Company – Technical Polymers Ticona.”


Performance Products

Site	Leased/Owned	Products/Function

Frankfurt am Main, Germany	Owned by InfraServ GmbH & Co.	Sorbates
(Nutrinova)	Höchst KG in which Celanese	Sunett^®
	holds a 31.2 percent limited
	partnership interest

Mantes-la-Ville, France (Trespaphan)	Owned	OPP film


Neunkirchen, Germany (Trespaphan)	Owned	OPP film

Zacapu, Mihoacan, Mexico	Owned	OPP film
(Trespaphan)


Krugersdorp, South Africa	Owned	OPP film
(Trespaphan)

Polyplastics has its principal production facilities in Japan, Taiwan and Malaysia. Korean Engineering Plastics has its principal production facilities in South Korea. Celanese’s Acetyl Products segment has a joint venture with manufacturing facilities in Saudi Arabia, and its Acetate Products segment has three joint ventures with production facilities in China.

In 2001, Celanese and its consolidated subsidiaries, in the aggregate, had capital expenditures for the expansion and modernization of production, manufacturing, research and administrative facilities of €231 million. In 2000, these expenditures amounted to €235 million. Celanese believes that its current facilities and those of its consolidated subsidiaries are adequate to meet the requirements of Celanese’s present and foreseeable future operations. Celanese continues to review its capacity requirements as part of its strategy to maximize its global manufacturing efficiency.

For information on environmental issues associated with Celanese’s properties, see “Information on the Company – Environmental and Other Regulation” and “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Environmental Matters.” Additional information with respect to Celanese’s property, plant and equipment, and leases is contained in Notes 11 and 22 to the Consolidated Financial Statements.

Item 5. Operating and Financial Review and Prospects

You should read the following discussion and analysis of the financial condition and the results of operations of Celanese together with Celanese’s Consolidated Financial Statements and the notes to those financial statements, which were prepared in accordance with U.S. GAAP.

Investors are cautioned that the forward-looking statements contained in this section 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” located at the end of this section.

Basis of Presentation

On October 22, 1999, the effective date of the demerger, Celanese was formed through the demerger of the principal industrial chemicals businesses and some other businesses and activities from Hoechst. Hoechst distributed all the outstanding shares of Celanese to existing Hoechst shareholders. Celanese assumed all of the assets and liabilities (including contractual rights and obligations related to other current and former Hoechst businesses) of the demerged businesses.

The Consolidated Financial Statements reflect, for the periods indicated, the financial condition, results of operations and cash flows of the businesses transferred from Hoechst and have been presented to exclude the effects of discontinued operations. See “Summary of Consolidated Results – 2001 Compared with 2000 – Discontinued Operations.” The Consolidated Financial Statements, for the periods prior to the effective date of the demerger, 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 condition, results of operations and cash flows of Celanese have been and may, in the future, be affected by special charges. Special charges include provisions for restructuring, asset impairments and other unusual expenses and income incurred outside the ordinary course of business. Special charges totaled €530 million, €29 million and €559 million in 2001, 2000 and 1999, respectively. For a further discussion of special charges, see “Summary by Business Segment – 2001 Compared with 2000 – Special Charges,” “Summary of Consolidated Results – 2001 Compared with 2000 – Special Charges,” “Summary by Business Segment – 2000 Compared with 1999 – Special Charges” and “Summary of Consolidated Results – 2000 Compared with 1999 –Special Charges.”

Celanese evaluates performance based on earnings before interest, taxes, depreciation and amortization (“EBITDA”), excluding special charges. EBITDA, which may be calculated differently by other companies, is calculated by adding depreciation and amortization expense back to operating profit. Management believes that EBITDA excluding special charges is an appropriate measure for evaluating the performance of its operating segments as it closely reflects cash flow management. Celanese excludes special charges from EBITDA for better comparability between periods. EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets. EBITDA excluding special charges should be considered in addition to, not as a substitute for, operating profit, net earnings, cash flows and other measures of financial performance reported in accordance with U.S. GAAP.

Major Events in 2001

Celanese successfully implements “Focus” initiative targeting efficiency increases, working capital optimization, and a sharply focused capital expenditure program
Restructuring programs, including projects “Focus” and “Forward”, initiated in 2001 identified approximately 1,600 positions to be eliminated through the closure of eight high-cost facilities and the streamlining of administrative and plant operations
Deterioration in Chemical Intermediates outlook results in goodwill and fixed asset impairment charges
Edward Munoz, management board member and CEO of Technical Polymers Ticona, retires; David Weidman becomes chief operating officer with responsibility for Acetyl Products, Chemical Intermediates and Technical Polymers Ticona, effective January 1, 2002
Significant technology advancements lead to process improvements in acetic acid and vinyl acetate monomer
Construction begins on a new and expanded Ticona plant to produce GUR^®ultra-high molecular weight polyethylene

Financial Highlights


	Year Ended December 31,

	2001		2001		2000	1999

	(in $ millions,⁽¹⁾ except for per share data)		(in € millions, except for per share data)

Net sales	4,537		5,097		5,207	4,318
Gross profit	604		678		766	697
EBITDA excluding special charges⁽²⁾	374		420		500	377
Operating profit (loss)	(470	)	(528	)	83	(521	)
Earnings (loss) from continuing operations	(351	)	(394	)	55	(502	)
Net earnings (loss)	(343	)	(385	)	58	(207	)
Weighted average shares – basic and diluted	50,331,847		50,331,847		53,293,128	55,915,369
Earnings (loss) per common share – from continuing operations	(6.97	)	(7.83	)	1.03	(8.98	)
Earnings (loss) per common share	(6.81	)	(7.65	)	1.09	(3.70	)

	Year Ended December 31,

	2001		2001		2000

	(in $ millions⁽¹⁾)		(in € millions)

Trade working capital⁽³⁾	611		687		993
Total assets	6,288		7,064		7,642
Net financial debt⁽⁴⁾	741		832		1,141
Shareholders’ equity	1,967		2,210		2,843


(1)	The U.S. $ figures are unaudited and have been translated solely for the convenience of the reader at an exchange rate of U.S. $0.8901 per €1.00, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2001.
(2)	Celanese defines EBITDA excluding special charges as operating profit plus depreciation and amortization plus special charges.
(3)	Celanese defines trade working capital as trade accounts receivable from third parties and affiliates net of allowance for doubtful accounts, plus inventories, less trade accounts payable to third parties and affiliates.
(4)	Celanese defines net financial debt as short-term borrowings and current installments of long-term debt plus long-term debt less cash and cash equivalents.

Overview – 2001 Compared with 2000

Net earnings (loss) declined significantly, reflecting weak conditions in most major markets, special charges related to restructuring programs initiated to increase Celanese’s future profitability and efficiency and goodwill and asset impairment charges. Operating results were enhanced by cost savings and efficiency improvements while lower payments relating to restructuring and reduced trade working capital improved cash flow.

Sales declined 2% on lower pricing (-2%) and lower volumes (-3%), largely offset by favorable currency effects (+2%) and the full year effect of the polyvinyl alcohol or PVOH business, which was acquired in September 2000 (+1%). EBITDA excluding special charges declined 16% amid deteriorating markets characterized by reduced demand, low capacity utilization and weaker pricing. Ticona was affected by significant volume losses as a result of the downturn in the global telecommunications industry and decreased U.S. automotive production. Lower demand for Acetyl Products led to low industry utilization rates and reduced selling prices. Continuing market oversupply and declining prices, especially in acrylates, resulted in an unsatisfactory performance in Chemical Intermediates. Acetate Products and Performance Products reported steady profitability compared to the prior year.

Celanese reduced its net financial debt by 27% from €1,141 billion as of December 31, 2000 to €832 million as of December 31, 2001 by utilizing a portion of its €520 million in 2001 operating cash flows. Operating cash flows improved due to a decrease in the outflow required to fund special charges and a reduction in trade working capital.

Despite the poor market conditions in 2001, Celanese exceeded its targets set under the “Focus” profit improvement initiative. The targets consisted of reducing trade working capital by €100 million in 2001 from 2000 levels, controlling capital expenditures at or below the year 2000 level and contributing €100 million to EBITDA from programs to increase efficiency. During 2001, trade working capital declined by €306 million from €993 million in 2000 and capital expenditures were €231 million compared to €235 million in 2000. EBITDA improvements were overshadowed by the effects of lower volumes and weak overall market conditions.

To increase future profitability and efficiency, Celanese initiated programs in 2001 to restructure its operations. The restructuring programs identified approximately 1,600 positions to be eliminated through the closure of eight high cost facilities and the streamlining of operations at plant and administrative levels throughout Celanese. Special charges for 2001 initiatives included €230 million of restructuring charges and €92 million of other special charges. Annual cost savings from the 2001 restructuring programs are estimated to be in excess of €150 million upon completion of these initiatives. Additionally, Celanese recognized €262 million for goodwill impairments triggered by a deterioration in the outlook for certain businesses in the Chemical Intermediates segment.

Special charges also include income of €54 million for adjustments to prior year restructuring reserves, the receipt of reimbursements from insurance companies linked to the plumbing cases and settlements with former Hoechst affiliates. See “Summary of Consolidated Results – 2001 Compared with 2000 – Special Charges.”

In 2001, Celanese developed and implemented significant technology improvements in acetic acid and vinyl acetate monomer that increase efficiencies and provide for significant capacity increases with minimal capital expenditures. The Six Sigma business process, implemented during 2001, will target costs savings, operational efficiencies and revenue enhancements in 2002.

Celanese also made selective capital investments to further enhance the market position of its products. Construction began in 2001 on a new and expanded plant for GUR® ultra-high molecular weight polyethylene, used in industrial and medical applications, and additional production lines for Vectra® liquid crystal polymer, used in electrical and electronics applications. The Acetate Products business finalized a marketing alliance for acetate filament with Teijin Ltd., which will enhance Celanese’s market position in Japan.

Selected Data by Business Segment


		Year Ended December 31,

		2001		2001					2000					1999

		$⁽¹⁾		€		% of Segment⁽²⁾			€		% of Segment⁽²⁾			€		% of Segment⁽²⁾

	(in millions, except percentages)

Net Sales⁽³⁾
Acetyl Products		1,918		2,155			42		2,106			40		1,561			36
Chemical Intermediates		943		1,059			20		1,085			21		884			20
Acetate Products		678		762			15		756			14		739			17
Technical Polymers Ticona		688		773			15		923			17		788			18
Performance Products		392		440			8		409			8		397			9

Segment Total		4,619		5,189			100		5,279			100		4,369			100

Other Activities		74		83					84					60
Intersegment Eliminations		(156	)	(175	)				(156	)				(111	)

Total Net Sales		4,537		5,097					5,207					4,318

Special Charges⁽⁴⁾
Acetyl Products		111		125			24		68			119		53			12
Chemical Intermediates		319		358			68		4			7		57			13
Acetate Products		45		50			9		8			14		81			18
Technical Polymers Ticona		(8	)	(9	)		(2	)	(29	)		(51	)	154			35
Performance Products		4		4			1		6			11		99			22

Segment Total		471		528			100		57			100		444			100

Other Activities		2		2					(28	)				115

Total Special Charges		473		530					29					559

Operating Profit (Loss)⁽³⁾
Acetyl Products		(65	)	(73	)		15		(10	)		(10	)	(65	)		19
Chemical Intermediates		(364	)	(409	)		83		(24	)		(23	)	(47	)		13
Acetate Products		(29	)	(32	)		7		9			9		(46	)		13
Technical Polymers Ticona		(13	)	(15	)		3		96			92		(96	)		28
Performance Products		35		39			(8	)	33			32		(93	)		27

Segment Total		(436	)	(490	)		100		104			100		(347	)		100

Other Activities		(34	)	(38	)				(21	)				(174	)

Total Operating Profit (Loss)		(470	)	(528	)				83					(521	)

EBITDA Excluding Special Charges⁽⁴⁾
Acetyl Products		185		208			46		200			36		89			21
Chemical Intermediates		24		27			6		50			9		84			19
Acetate Products		81		91			20		92			17		95			22
Technical Polymers Ticona		46		52			11		140			25		123			28
Performance Products		67		75			17		74			13		42			10

Segment Total		403		453			100		556			100		433			100

Other Activities		(29	)	(33	)				(56	)				(56	)

Total EBITDA Excluding Special Charges		374		420					500					377


(1)	The U.S. $ figures are unaudited and have been translated solely for the convenience of the reader at an exchange rate of U.S. $0.8901 per €1.00, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2001.
(2)	The percentages in this column represent the percentage contribution of each segment to the total of all segments.
(3)	Derived from the accompanying audited Consolidated Financial Statements.
(4)	For a further discussion of special charges, see “Summary by Business Segment – 2001 Compared with 2000 – Special Charges,” “Summary of Consolidated Results – 2001 Compared with 2000 – Special Charges,” “Summary by Business Segment – 2000 Compared with 1999 – Special Charges” and “Summary of Consolidated Results – 2000 Compared with 1999 – Special Charges.”

Summary by Business Segment – 2001 Compared with 2000

Acetyl Products

Net sales for the Acetyl Products segment increased by 2% to €2,155 million in 2001 from €2,106 million in 2000 primarily due to the acquisition of the PVOH business in September 2000 (+3%) and favorable currency effects (+2%), largely offset by lower volumes (-2%) and pricing (-1%). Selling prices followed the trends of hydrocarbon costs, primarily natural gas and ethylene, which continued an upward pattern through the first quarter of 2001 but declined throughout the remainder of the year. Lower demand amid the weakening economic environment during the second half of 2001 accelerated the decrease in selling prices to levels below those of the comparable period in 2000. Reduced demand for acetic acid and vinyl acetate monomer resulted in lower volumes, which were partially offset by higher volumes in acetate esters, particularly in North America and Asia. Celanese was able to produce higher volumes of acetate esters in 2001 as the acetic acid plant in Singapore became fully operational.

The Acetyl Products segment recorded special charges of €125 million in 2001 compared to €68 million in 2000. These 2001 special charges were largely taken to reduce costs and increase operational efficiency by closing high-cost production facilities and streamlining administrative and operational functions under the “Focus” and “Forward” initiatives as well as other programs. See “Summary of Consolidated Results – 2001 Compared to 2000 – Special Charges”.

The 2001 special charges related to 2001 restructuring initiatives of €121 million and fixed asset impairments of €18 million relating to the acetyl derivatives and polyols business line. These special charges were offset by a €14 million favorable adjustment to prior year restructuring activities. The €121 million in restructuring initiatives included €78 million for the shutdown of the acetic acid, pentaerythritol, and vinyl acetate monomer units in Edmonton, Alberta and €43 million relating primarily to employee severance costs at plant and administrative offices as well as closure costs associated with a research and development center in the United States. The closure of the research and development center resulted from the decision to relocate the functions to production sites. The €18 million fixed asset impairment related to a reassessment of the expected long-term value of the polyols product line. The €14 million favorable adjustment related to lower than expected demolition and decommissioning costs associated with the closure of the Knapsack, Germany site in 2000. This adjustment resulted from a third party site partner assuming ownership of the existing facilities and obligations. In 2000, the Acetyl Products segment recorded special charges of €68 million, which included €53 million for the closure of acetyl units in Knapsack, Germany. The remaining €15 million was primarily associated with employee severance costs from restructuring at an administrative office and a production facility in Texas.

The operating loss for the Acetyl Products segment increased to €73 million in 2001 from €10 million in 2000. The increase in operating loss in 2001 resulted primarily from the special charges described above and from margin pressure, as selling prices declined at a greater rate than raw material costs. This was partially offset by the benefits of aggressive cost reduction efforts. In addition, 2001 was positively affected by the receipt of non-recurring compensation payments associated with operational problems experienced by the carbon monoxide supplier to Celanese’s Singapore facility from July 2000 through May 2001. Total compensation payments, related to the carbon monoxide supplier, received in 2001 were €43 million, of which €4 million was recognized in 2000.

EBITDA excluding special charges for the Acetyl Products segment increased by €8 million to €208 million in 2001 as compared to €200 million in 2000.

Chemical Intermediates

Net sales for the Chemical Intermediates segment decreased by 2% to €1,059 million in 2001 from €1,085 million in 2000, primarily due to price decreases (-6%), largely offset by volume increases (+2%) and favorable currency movements (+2%). For 2001, sales prices were lower than 2000 in most products, including acrylic acid, butanol, butyl acrylate and 2-ethyl hexanol, due to global industry capacity outpacing market growth and the pass through of falling raw material costs, primarily propylene. Volumes in the Chemical Intermediates segment were higher with increases in the oxo business line partially offset by decreases in the acrylates business line while specialties business line volumes remained relatively flat. The oxo business line volume improvement resulted from temporary market shortages in Asia. In the acrylates business line, difficult business conditions persisted due to continuing price pressure and customer consolidation.

In 2001, the Chemical Intermediates segment recorded special charges of €358 million. These special charges largely resulted from the impairment of most of the segment’s goodwill and a portion of its fixed assets, due to a reassessment in the expected long-term value of the segment’s underlying businesses. Special charges were also taken to reduce costs and increase operational efficiency by streamlining administrative and operational functions under the “Focus” and “Forward” initiatives as well as other programs. See “Summary of Consolidated Results – 2001 Compared to 2000 – Special Charges”.

Of the €358 million in special charges, €262 million related to goodwill impairments and €74 million to fixed asset impairments resulting primarily from the deterioration in the outlook of the acrylates and oxo business lines and certain products in the specialties business line. The remaining €28 million related to restructuring initiatives, primarily for employee severance costs at both plant and administrative sites. These charges were partially offset by recoveries due to Celanese of €6 million from third party site partners. In 2000, the Chemical Intermediates segment recorded special charges of €4 million, primarily related to administrative restructuring.

The operating loss for the Chemical Intermediates segment increased to €409 million from €24 million in 2000. This was primarily due to the special charges previously discussed and higher costs due to plant turnarounds and outages. Additionally, performance of the acrylates business line was negatively affected by unfavorable pricing under an existing supply agreement. Early in the first quarter of 2002, a sharp decline in selling prices in the acrylates business line occurred as a result of weak market conditions and low utilization rates. As a result, the business outlook for the acrylates business line has deteriorated.

EBITDA excluding special charges for the Chemical Intermediates segment decreased to €27 million in 2001 from €50 million in the comparable period.

Acetate Products

Net sales for the Acetate Products segment increased by 1% to €762 million in 2001 from €756 million in 2000. Favorable currency movements (+3%), and slightly higher sales volumes (+1%), were largely offset by a change in the composition of the segment due to the transfer of the high performance polymer (polybenzimidazole or PBI) and Vectran^®polymer fiber product lines to Other Activities in July 2000 (-2%), and lower average pricing (-1%). Average acetate prices declined slightly due to changes in the product mix from higher priced filament to lower priced tow. Higher volumes for tow, reflecting increased demand in Europe, were mostly offset by the continuing decline in volumes for filament, primarily caused by the effects of the weakening U.S. economy, the shift in fashion away from filament-based products and increased competition in Asia.

Special charges in the Acetate Products segment amounted to €50 million in 2001 as compared to €8 million in 2000. The special charges were a continuation of the ongoing strategy to improve cost efficiency and align capacity with market demand. See “Summary of Consolidated Results – 2001 Compared to 2000 – Special Charges”. The charges in 2001 were for the costs associated with the closure of acetate filament operations in Rock Hill, South Carolina and Lanaken, Belgium, as well as costs incurred with the relocation of filament operations within the United States. Additional special charges were incurred in connection with employee severance costs at its production facility in Mexico. The net charge in 2000 represented employee severance costs associated with downsizing across the business as well as relocation costs incurred by moving acetate filament equipment within North America.

Acetate Products recorded an operating loss of €32 million in 2001, compared with an operating profit of €9 million in 2000. Higher special charges, weakening filament volumes, and higher energy costs, primarily for coal, were partially offset by continued cost reductions at all locations.

EBITDA excluding special charges for the Acetate Products segment of €91 million in 2001 decreased slightly from €92 million in 2000.

Technical Polymers Ticona

Net sales for the Ticona segment decreased by 16% to €773 million in 2001 from €923 million in 2000 largely as the result of lower volumes (-18%), as prices (+1%) and currency movements (+1%) remained relatively unchanged. Volumes declined in many products, including liquid crystal polymers, polyesters and polyacetals, due to lower demand, particularly from the global telecommunications and U.S. automotive industries. Sales volumes to the global telecommunications industry declined sharply, particularly during the second half of 2001, as customers depleted their inventory levels in response to lower end user demand. In addition, European sales weakened during the fourth quarter, due to reduced demand in industrial markets and a weakening of automotive exports. Average prices increased slightly as a result of a more favorable product sales mix, but came under pressure in the second half as a result of industry overcapacity and imports of standard grade polyacetal from Asia.

In special charges, the Ticona segment had income of €9 million in 2001 compared to income of €29 million in 2000. The income in 2001 resulted from €31 million of higher than expected insurance reimbursements associated with the plumbing cases, which was largely offset by restructuring expenses for employee severance costs in the United States and Europe. These restructuring initiatives were taken to streamline administrative and operational functions under the Forward initiative. See “Summary of Consolidated Results – 2001 Compared to 2000 – Special Charges”. The favorable adjustment recognized in 2000 was primarily due to €18 million of higher than expected insurance reimbursements associated with the plumbing cases. In addition, an unfavorable tax treatment affected the severance benefits to be received by employees in Germany. Therefore, Celanese modified the timing of payments associated with the 1999 restructuring plan, which resulted in a €10 million favorable adjustment in 2000.

Ticona recorded an operating loss of €15 million in 2001 compared to a profit of €96 million in 2000 due to lower volumes, higher raw material and energy costs, and lower income from special charges, which were slightly offset by the benefits of cost reduction efforts. Due to decreased demand from customers who were depleting their inventory, Ticona temporarily reduced production levels, which resulted in higher unit costs.

EBITDA excluding special charges declined to €52 million in 2001 compared to €140 million in 2000.

Performance Products

Net sales for the Performance Products segment increased by 8% to €440 million in 2001 from €409 million in 2000. OPP film sales for 2001, which represented 64% of net sales in this segment, decreased 2% from last year, as volumes in 2000 were higher due to the liquidation of inventory associated with the closure of the Swindon, UK facility in 1999. Prices were marginally higher but were offset by currency effects. Food ingredients sales for 2001, which represented the remaining 36% of total segment net sales, increased by 27% on higher volumes for the high intensity sweetener Sunett^®and for resale products in Japan and Australia. Sorbate prices recovered slightly from the lower levels in 2000.

The Performance Products segment recorded €4 million of special charges in 2001 compared to €6 million in 2000. The special charges in 2001 related to severance costs associated with the streamlining of operations within the OPP films business. See “Summary of Consolidated Results – 2001 Compared to 2000 – Special Charges”. Special charges in 2000 related primarily to the relocation of OPP film production assets from Swindon, UK to Mantes-la-Ville, France.

Operating profit for the Performance Products segment of €39 million in 2001 improved from €33 million in 2000 mainly as a result of increased volumes for food ingredients. This improvement was largely offset by a reduction in the operating profit of the OPP films business, primarily resulting from higher raw material costs and manufacturing inefficiencies related to the ramp-up of a production line transferred from Swindon, UK to Mantes-la-Ville, France as well as a shift to higher product grades manufactured in Zacapu, Mexico.

EBITDA excluding special charges for the Performance Products segment increased by €1 million to €75 million in 2001 from €74 million in 2000.

Other Activities

Other Activities includes revenues mainly from Celanese’s captive insurance companies, Celanese Ventures GmbH, Celanese Advanced Materials, Inc., as well as ancillary businesses and service companies, which do not have significant sales. Celanese Advanced Materials primarily consists of the high performance polymer PBI and Vectran^®polymer fiber product lines.

In the second quarter of 2000, Celanese acquired 100% of Axiva GmbH, which was renamed Celanese Ventures GmbH, a process technology and engineering business, from Aventis S.A. In the fourth quarter of 2000, Celanese sold 75% 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.

Effective July 1, 2000, the PBI and Vectran product lines were transferred from the Acetate Products segment to Other Activities to reflect the strategic alignment of PBI with the fuel cell project of Celanese Ventures GmbH.

Net sales for Other Activities remained relatively flat at €83 million and €84 million in 2001 and 2000, respectively, as increased sales due primarily to the full year contribution of PBI were offset by a decrease in third party sales by Celanese’s captive insurance companies.

In special charges, Other Activities recorded an expense of €2 million in 2001 as compared to income of €28 million in 2000. The €2 million expense primarily consists of corporate employee severance costs, which were partially offset by a €4 million favorable adjustment related to a net reduction in reserves associated with settlements of environmental indemnification and other obligations associated with former Hoechst entities. Other Activities recognized a €28 million favorable adjustment to special charges in 2000, primarily associated with a restructuring reserve recorded in 1999. The reserve was adjusted due to the earlier than expected disposal of the lease obligations for former administrative facilities.

The operating loss of Other Activities increased to €38 million in 2001 from €21 million in 2000. The increase resulted primarily from the net effect of special charges as discussed above partially offset by increased income generated by the full year contribution of the PBI and Vectran product lines.

EBITDA excluding special charges for Other Activities improved to a loss of €33 million in 2001 from a loss of €56 million in 2000.

Summary of Consolidated Results – 2001 Compared with 2000

Net Sales

Net sales decreased by 2% to €5,097 million in 2001 as compared to €5,207 million in 2000 primarily as a result of lower volumes and lower selling prices, partially offset by favorable currency movements. Slight increases in Acetyl Products, Acetate Products and Performance Products were more than offset by decreases in Technical Polymers Ticona and Chemical Intermediates. Ticona’s sales fell sharply as the result of a significant decline in volumes.

Cost of Sales

Cost of sales decreased by 1% to €4,419 million in 2001 compared with €4,441 million in 2000. Cost of sales as a percentage of net sales increased to 87% in 2001 from 85% in 2000, reflecting higher raw material and energy costs and lower capacity utilization, primarily in Ticona.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 3% to €583 million in 2001 from €567 million in 2000 driven largely by currency effects and increased selling, general and administrative costs associated with the newly acquired PVOH business and increased selling efforts in food ingredients. Selling, general and administrative expenses as a percentage of sales remained flat at 11% in both 2001 and 2000. In 2001, Celanese had favorable adjustments of €12 million relating to a reduction in environmental reserves due to favorable trends in environmental remediation, lower eBusiness spending as compared to 2000 and positive effects of cost reduction programs throughout the entire company. In 2000, Celanese received a €17 million insurance settlement related to environmental claims.

Research and Development Expenses

Research and development expenses remained relatively flat at €95 million in 2001 compared to €94 million in 2000. Research and development expenses as a percentage of sales remained flat at 2% for both 2001 and 2000.

Special Charges

	Employee Termination Benefits		Plant/Office Closures		Total Restructuring		Non-Restructuring Special Charges		Total Special Charges		Of which non-cash

	( in € millions)

Focus	29		17		46		4		50		8
Forward	96		88		184		88		272		116
Goodwill Impairment	–		–		–		262		262		262
Other	–		–		–		(35	)	(35	)	(28	)

Subtotal	125		105		230		319		549		358
Restructuring Adjustments	(2	)	(17	)	(19	)	–		(19	)	(19	)

Total Special Charges	123		88		211		319		530		339

Project “Focus”, initiated in early 2001, set goals to reduce trade working capital by €100 million compared to end of year 2000 levels, limit capital expenditures to a maximum of last year’s level of €235 million and contribute €100 million to EBITDA from programs to increase efficiency. Project “Forward” was announced at the end of August 2001 and initiated additional restructuring and other measures to reduce costs and raise profitability. The restructuring initiatives detailed below are expected to result in a reduced cost base and operational efficiencies in 2002.

In 2001, Celanese recorded special charges totaling €530 million, which consisted of €230 million of restructuring charges, €19 million of favorable adjustments to restructuring reserves recorded in 1999 and 2000 and €319 million of other special charges. Of the €230 million of restructuring charges, €46 million related to the “Focus” initiative and €184 million related to the “Forward” initiative.

The €46 million of restructuring charges related to the “Focus” initiative included employee severance costs of €29 million and plant and office closure costs of €17 million. The €29 million of employee severance costs primarily consisted of €11 million for the shut-down of acetate filament production at Rock Hill, South Carolina, €16 million to streamline operations at two chemical production facilities in the United States, €1 million for the idling of the pentaerythritol unit at Edmonton, Alberta and €1 million for the closure of a chemical distribution terminal in the United States.

The €17 million of “Focus” initiative restructuring charges related to plant and office closure costs consisted of fixed asset impairments of €5 million for the shut-down of the acetate filament unit at Lanaken, Belgium and €4 million of fixed asset impairments and other closure costs related to the closure of a chemical distribution terminal in the United States. Also included in plant and office closure costs were €6 million for equipment and other decommissioning costs for the acetate filament production at Rock Hill, and €2 million for equipment and other idling costs for the pentaerythritol unit at Edmonton.

The €184 million of restructuring charges related to the “Forward” initiative included employee severance costs of €96 million and plant and office closure costs of €88 million. The €96 million of employee severance costs consisted primarily of €26 million for the streamlining of chemical production and administrative positions in the United States, Germany and Singapore, €23 million for administrative and production positions at Ticona in the United States and Germany, which is net of a €5 million reimbursement from a third party site partner, €18 million for the restructuring of production and administrative positions in Mexico, net of €4 million relating to a reimbursement from a third party site partner and income from forfeited pension plan assets, €7 million for the closure of the acetic acid, pentaerythritol and vinyl acetate monomer units and the elimination of administrative positions in Edmonton, €7 million for the elimination of corporate administrative positions, €6 million resulting from the closure of a chemical research and development center in the United States, €5 million for the shut-down of acetate filament production at Lanaken, Belgium, and €4 million for Trespaphan restructuring in Germany, France, Mexico and the United States.

The €88 million of “Forward” initiative restructuring charges related to plant and office closures consisted of €72 million for the cancellation of supply contracts, other required decommissioning and environmental closure costs and fixed asset impairments relating to the closure of the acetic acid, pentaerythritol and vinyl acetate monomer units in Edmonton. Also included in plant and office closure costs were €11 million for fixed asset impairments, contract cancellation and other costs associated with the closure of the chemical research and development center in the United States, €4 million for shut-down costs at the acetate filament facility in Lanaken, and €1 million associated with the cancellation of a lease associated with the closure of an administrative facility in Germany.

In 2001, the “Focus” and “Forward” initiatives identified approximately 1,600 positions to be eliminated, of which approximately 500 positions had been eliminated as of December 31, 2001.

The €19 million of favorable adjustments associated with prior year restructuring reserves consisted of a €5 million adjustment to the 1999 reserves and a €14 million adjustment to the 2000 reserves. Of the 1999 adjustment, €3 million related to the reversal of a reserve for closure costs for a parcel of land in Celaya, Mexico that Celanese donated to the Mexican government, which assumed the remaining liabilities. The 1999 adjustment also included €2 million relating to less than anticipated severance costs for Ticona employees in Germany. The entire 2000 adjustment was due to lower than expected demolition and decommissioning costs for the Acetyl Products production facility in Knapsack Germany. This adjustment resulted from a third party site partner assuming ownership of the existing facility and obligations.

The other special charges of €319 million consisted of Chemical Intermediates goodwill impairment of €262 million, Chemical Intermediates fixed asset impairments of €74 million, Acetyl Products fixed asset impairments of €18 million and €2 million for the relocation of acetate filament production assets associated with restructuring initiatives. These charges were slightly offset by recoveries due to Celanese of €6 million from third party site partners. Additionally, special charges of €4 million related to the “Focus” initiative were recorded for the relocation of acetate filament production assets associated with restructuring initiatives. Also included in other special charges was €31 million of income from the receipt of higher than expected insurance reimbursements linked to the plumbing cases (See Note 24 to the Consolidated Financial Statements) and €4 million of favorable adjustments related to a net reduction in reserves associated with settlements of environmental indemnification and other obligations associated with former Hoechst entities.

In 2000, Celanese recorded special charges totaling €29 million, which consisted of €97 million of restructuring charges, €59 million of favorable adjustments to restructuring reserves recorded in 1999, €9 million of costs for the relocation of production assets associated with restructuring initiatives and €18 million of favorable adjustments from the receipt of higher than expected insurance reimbursements linked to the plumbing cases (See Note 24 to the Consolidated Financial Statements).

The €97 million of restructuring charges included employee severance costs of €46 million and plant and office closure costs of €51 million. Employee severance costs of €33 million related mainly to the reduction of approximately 170 positions at two U.S. chemical facilities and the closure of a European Acetyl Products plant. Additionally, severance costs of €11 million were associated with the planned reduction of approximately 115 positions in the Acetate Products segment. The plant and office closure charges of €51 million consisted mainly of contractual obligations and asset impairments for the closure of an Acetyl Products plant in Europe (€47 million). Annual cost savings from the 2000 restructuring initiatives are estimated to be in excess of €35 million upon completion of these initiatives.

The €59 million of favorable adjustments to the 1999 restructuring reserves related to employee termination benefits (€24 million) and plant and office closures (€35 million). Employee termination benefits were adjusted by €11 million due largely to unplanned voluntary resignations and by €10 million due to the aforementioned modification of the 1999 restructuring plan in the Ticona segment. In addition, a delay in the scheduled closure of a U.S. acetate filament production facility led to a net adjustment of €3 million in restructuring reserves. This facility was closed in 2001. The adjustments associated with plant and office closures resulted mainly from the earlier than expected disposal of lease obligations for former administrative facilities (€28 million). As a result of the need for additional office space following the acquisition of the PVOH business, we cancelled previous plans to rationalize the U.S. chemical administration building (€4 million). The closure costs of a Canadian acetate filament facility were lower than estimated (€3 million).

Special charges of €9 million consisted of non-restructuring charges related to the relocation of the OPP Film production assets from Swindon, UK to Mantes-la-Ville, France (€6 million) and the cost of transferring acetate filament equipment within North America resulting from restructuring initiatives (€3 million).

Foreign Exchange Gain (Loss)

Foreign exchange gain (loss) decreased to a gain of €2 million in 2001 from a gain of €5 million in 2000. This change is primarily attributable to the fluctuation of the U.S. dollar against the euro.

Operating Profit (Loss)

An operating loss of €528 million was incurred in 2001 compared to a profit of €83 million in 2000. The main reason for this change was the increase in special charges, which increased from €29 million in 2000 to €530 million in 2001. The effects of lower volumes, mainly at Ticona, and higher raw material and energy costs, throughout the segments, also contributed to the decrease.

EBITDA excluding special charges totaled €420 million in 2001 compared to €500 million in 2000.

Equity in Net Earnings of Affiliates

Equity in net earnings of affiliates decreased to €13 million in 2001 from €19 million in 2000. This decrease was mainly attributable to decreased earnings from Polyplastics Co. Ltd., which was affected by the slowing Asian economy.

Interest Expense

Interest expense increased by 8% to €81 million in 2001 from €75 million in 2000, mainly as a result of interest associated with the time value of call options and lower capitalization of interest in 2001 as compared to 2000 resulting primarily from the completed construction of Celanese’s plant in Singapore, partially offset by a lower average debt level in 2001 compared to 2000.

Interest and Other Income, Net

Interest and other income, net decreased to €64 million in 2001 from €112 million in 2000, mainly due to lower transaction gains on foreign currency financing, write-offs of certain investments, including eBusiness interests, and lower interest income, partially offset by higher dividend income from our investments in Saudi Arabia and China. In 2001, Celanese received gross proceeds of €10 million and recorded a gain of €6 million relating to the sale of its ownership interests in Infraserv GmbH & Co. Münchsmünster KG, Hoechst Service Gastronomie GmbH, and Covion Organic Semiconducters GmbH.

Income Taxes

In 2001, Celanese recognized an income tax benefit of €138 million as compared to a provision of €84 million in 2000. The effective tax rate was 26% in 2001 as compared to 60% in 2000. The effective tax rate in 2001 was favorably affected by the full recognition of previously reserved deferred tax assets of a subsidiary in Germany (€46 million), the utilization of certain net operating loss carryforwards, offset by non-deductible goodwill amortization and impairment charges.

Discontinued Operations

In 2001, Celanese completed the sale of NADIR filtration GmbH, formerly Celgard GmbH and received minimal proceeds from this sale and recorded a gain, net of tax, of €2 million in gain on disposal of discontinued operations. Celanese recorded an additional gain in 2001 of €7 million, net of taxes, in gain on disposal of discontinued operations related to a business divested in 2000.

In 2000, Celanese completed the sale of Vinnolit Kunstoff GmbH, Vintron GmbH and the phosphorous and phosphorous derivatives business conducted by the Thermphos Group. Celanese received gross proceeds of €35 million from the sales of these discontinued operations, which led to a net cash inflow in 2000 of €30 million from the 2000 divestitures and additional cash inflow of €60 million from the 1999 divestitures.

The completion of the Thermphos, Vintron and Vinnolit transactions led to a gain in 2000 of €9 million, net of taxes, which was offset by additional losses incurred in 2000 relating to other discontinued operations sold in 1999.

Earnings from discontinued operations, net of taxes, in 2000 were €3 million and consisted of earnings from operations of discontinued operations.

In 1999, Celanese completed the sales of Copley Pharmaceuticals Inc., the ethylene oxide / ethylene glycol business, the U.S. and Japanese separation products business, the polyester fiber and bottle resin business in Millhaven, Ontario, Canada and Celanese’s interests in the Dyneon fluoropolymer and Targor polypropylene joint ventures. Celanese received gross proceeds of €1,001 million from the sales of these discontinued operations, which led to a net cash inflow of €913 million in 1999. As a result of these transactions, Celanese recognized a gain in 1999 of €452 million, net of taxes, on disposals of discontinued operations in the consolidated statement of operations. In addition, earnings from operations of discontinued operations, net of taxes, in 1999 were €14 million relating to these divested businesses (See Note 6 to the Consolidated Financial Statements).

Earnings from discontinued operations, net of taxes, in 1999 of €310 million consisted of the net gain associated with the transactions discussed above of €452 million, the expected loss on the transactions associated with the businesses to be divested in 2000 of €154 million and the earnings from operations of discontinued operations of €12 million.

The following table summarizes the results of the discontinued operations for the years ended December 31, 2001, 2000 and 1999.

Sales

Operating
Profit (Loss)

Equity in Net
Earnings of Affiliates

2001

2000

1999

2001

2000

1999

2001

2000

1999

(in € millions)

Discontinued operations of Performance Products

–

Discontinued operations of Other Activities

–

649

–

(38

)

–


Acetate Products

Site	Leased/Owned	Products/Function

Edmonton, Alberta, Canada	Owned	Tow

Lanaken, Belgium	Owned	Tow

Narrows, Virginia, USA	Owned	Tow, Filament

Ocotlán, Jalisco, Mexico	Owned	Tow, Filament

Rock Hill, South Carolina, USA	Owned	Flake