20-F 1 d11994-form20f.htm Celanese Form 20-F

As Filed with the Securities and Exchange Commission on February 28, 2003

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, 2002

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	50,058,476
(as of December 31, 2002)

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]

Part I

		Page
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		10
Business Summary		10
Segment Overview		11
Strategy		12
Business Segments		14
Other Activities		26
Acquisitions and Divestitures		26
Raw Materials and Energy		27
Research and Development		28
Intellectual Property		29
Environmental and Other Regulation		29
Organizational Structure		32
Description of Property		32
Item 5. Operating and Financial Review and Prospects		36
Basis of Presentation		36
Major Events in 2002		37
Financial Highlights		38
Overview – 2002 Compared with 2001		38
Selected Data by Business Segment		40
Summary by Business Segment – 2002 Compared with 2001		41
Summary of Consolidated Results – 2002 Compared with 2001		44
Summary by Business Segment – 2001 Compared with 2000		49
Summary of Consolidated Results – 2001 Compared with 2000		52
Liquidity and Capital Resources		55
Market Risks		60
Critical Accounting Policies and Estimates		62
New Accounting Standards		66
Outlook		66
Item 6. Directors, Senior Management and Employees		68
Directors and Senior Management		68
Compensation of Directors and Officers		71
Incentive Plans		72
Board Practices		74
Employees		76
Share Ownership		76
Item 7. Major Shareholders and Related Party Transactions		77
Major Shareholders		77
Related Party Transactions		78
Item 8. Financial Information		78
Export Sales		78
Legal Proceedings		78
Dividend Policy		81
Significant Changes		81

		Page
Item 9. The Offer and Listing		81
Nature of Trading Market		81
Item 10. Additional Information		86
Code of Ethics		86
Articles of Association		86
Material Contracts		90
Exchange Controls and Other Limitations Affecting Security Holders		90
Taxation		91
Documents on Display		93
Item 11. Quantitative and Qualitative Disclosures About Market Risk		94
Interest-Rate Risk Management		94
Foreign-Exchange Risk Management		95
Commodity Risk Management		95
Stock Based Compensation Risk Management		96
Item 12. Description of Securities Other Than Equity Securities		96

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies		97
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds		97
Item 15. Certain Disclosures		97
Controls and Procedures		97
Item 16. Reserved		97

PART III

Item 17. Financial Statements		98
Item 18. Financial Statements		98
Item 19. Exhibits		98
Certification of Chief Executive Officer		100
Certification of Chief Financial Officer		100
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

Since January 1, 1999 Celanese’s Consolidated Financial Statements have been preparted in euro. The Consolidated Financial Statements for the period ending 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 the period ended 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. U.S. dollar or U.S.$ amounts as of and for the year ended December 31, 2002 are unaudited, and have been converted solely for the convenience of the readers for 2002 from euro into U.S. dollars, at an exchange rate of U.S.$1.0485 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, 2002. 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 10, 2003, the Noon Buying Rate for the euro was U.S.$1.0740 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 2002 and 2001, and the statement of operations data for 2002, 2001 and 2000, 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 2000, 1999 and 1998 and the statement of operations data for 1999 and 1998 are derived from audited Consolidated Financial Statements not included in this Annual Report.

	Year Ended December 31,
	2002			2002			2001			2000			1999			1998
	(unaudited)			(audited)
	U.S. $⁽¹⁾			€			€			€			€			€
	(in millions, except for share and per share data, percentages and number of employees)
Statement of Operations Data:
Net sales		4,535			4,325			4,777			4,885			4,048			4,051
Cost of sales		(3,820	)		(3,643	)		(4,132	)		(4,155	)		(3,375	)		(3,206	)
Gross profit		715			682			645			730			673			845
Selling, general and administrative expenses		(494	)		(471	)		(552	)		(541	)		(544	)		(501	)
Research and development expenses		(78	)		(74	)		(87	)		(87	)		(71	)		(94	)
Special charges, net⁽²⁾		1			1			(496	)		(21	)		(538	)		(97	)
Operating profit (loss)⁽³⁾		162			155			(488	)		87			(490	)		167
Interest and other income, net⁽⁴⁾		11			11			(2	)		55			(69	)		(72	)
Income tax benefit (provision)		(56	)		(53	)		126			(88	)		70			(100	)
Minority interests		—			—			—			—			7			(40	)
Earnings (loss) from continuing operations		117			113			(364	)		54			(482	)		(45	)
Earnings (loss) from discontinued operations		58			55			(21	)		4			290			1
Extraordinary loss, net of income tax		—			—			—			—			(15	)		—
Cumulative effect of changes in accounting
principles, net of income tax		20			19			—			—			—			—
Net earnings (loss)		195			187			(385	)		58			(207	)		(44	)
Earnings (loss) per common share –
basic and diluted⁽⁵⁾		3.87			3.72			(7.65	)		1.09			(3.70	)		(0.79	)

Balance Sheet Data:
Total assets		6,424			6,127			7,064			7,642			7,789			7,566
Debt		645			615			880			1,165			948			1,422
Shareholders’ equity		2,102			2,005			2,210			2,843			2,866			2,736
Dividends paid per share⁽⁶⁾		—			—			0.40			0.11			—			—
Common stock		146			140			143			143			143			—
Weighted average shares – basic
and diluted (in thousands)		50,329			50,329			50,332			53,293			55,915			55,915

Other Data:
Operating margin (%)		3.57			3.58			(10.22	)		1.78			(12.10	)		4.12
Depreciation and amortization of tangible
and intangible assets		300			286			390			356			309			284
Capital expenditures on tangible fixed assets		228			218			217			218			252			315
Trade Working Capital⁽⁷⁾		647			618			605			902			911			914
Number of employees on a continuing
basis (end of period) in thousands		10.7			10.7			10.8			11.6			13.1			14.4

(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. $1.0485 per €1.00, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2002.

(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, 2002, 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)

See “Item 8. Financial Information – Dividend Policy.”

(7)

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.

Exchange Rate Information

As noted in “Currency Translation” above, 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 Celanese shares on the Frankfurt and New York Stock Exchanges.

The table below sets forth the Noon Buying Rates for the Deutsche Mark or DM versus the U.S. $, restated in euro for 1998, 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 1998, Celanese has restated the applicable Noon Buying Rate for the DM per U.S. $ into euro at the official fixed DM/euro conversion rate of DM 1.95583 per €1.00. This restatement matches the restatement into euro of the Consolidated Financial Statements, which, for 1998, 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
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	0.8455	0.9308	0.8909	0.8901
2002
July	0.9730	1.0156	0.9935	0.9769
August	0.9640	0.9882	0.9781	0.9806
September	0.9685	0.9959	0.9806	0.9879
October	0.9708	0.9881	0.9812	0.9881
November	0.9895	1.0139	1.0013	0.9932
December	0.9927	1.0485	1.0194	1.0485
2003
January	1.0469	1.0861	1.0622	1.0739
February (through February 10, 2003)	1.0740	1.0875	1.0808	1.0740

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 in 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 the reporting requirements of 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 volatile 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 acrylate 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 is subject to risks associated with the increased volatility in raw materials prices and the availability of key raw materials

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, 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.

A substantial portion of Celanese’s products and raw materials are commodities whose prices fluctuate as market supply/demand fundamentals change. Celanese manages its exposure through the use of derivative instruments and forward purchase contracts for commodity price hedging, entering into long-term supply agreements, and multi-year purchasing and sales agreements. Celanese’s policy allows the forward purchase of up to 80 percent of its natural gas and butane requirements, generally for up to 18 months using forward purchase or cash-settled swap contracts. During 2002, Celanese entered into forward purchase and cash-settled swap contracts for approximately 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, or if it elects to replace them, Celanese may have to do so at higher costs. In the first quarter of 2003, Celanese also purchased option contracts related to approximately 5 to 10 percent of its ethylene requirements. In addition, in 2002 Celanese pre-paid $25 million (€24 million) in a cost-based supply agreement and anticipates additional payments approximating €70 million over the next three years. Although Celanese seeks to offset 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 modify its practice of purchasing a portion of its commodity requirements forward, and consider utilizing a variety of other raw material hedging instruments in addition to forward purchase contracts in accordance with changes in market conditions.

Celanese has a policy of maintaining, when available, multiple sources of supply for raw materials. However, some of Celanese’s individual plants may have single sources of supply for some of their raw materials, such as carbon monoxide, acetaldehyde and wood pulp. There can be no assurance that the ability to obtain sufficient raw materials will not be adversely affected by unforeseen developments that would cause an interruption in supply. Even if Celanese has multiple sources of supply for a raw material, there can be no assurance that these sources can make up for the loss of a major supplier. Nor can there be any guarantee that profitability will not be affected should Celanese be required to qualify additional sources of supply in the event of the loss of a sole or a major supplier.

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 Performance Products and Technical Polymers Ticona segments, depend significantly on the development of commercially viable new products, product grades 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, “Item 4. Information on the Company – Environmental and Other Regulation”, and Notes 24 and 25 to the Consolidated Financial Statements.

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 vinyl acetate monomer or VAM, which Celanese also produces. These risk assessments entail a multi-stage process to determine to what extent the European 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 a particular chemical. In the case of VAM, a final ruling is not expected until the end of 2003. Celanese and other VAM producers are participating in this process with detailed scientific analyses supporting the industry’s position that VAM is not a probable human carcinogen and that labeling of final products should not be required but that, if it is, should only be at relatively high ppm levels. 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 Regulations” and Note 25 to the Consolidated Financial Statements

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 and interest rates.

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 such foreign currency contracts outstanding at December 31, 2002 were €955 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.

Significant changes in pension fund investment performance or assumptions relating to pension costs may have a material effect on the valuation of pension obligations, the funded status of pension plans, and Celanese’s pension costs.

Celanese’s funding policy for pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations. Celanese’s pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets, particularly equity securities, or in a change of the expected rate of return on plan assets. A change in discount rate would result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of Celanese’s pension plans as well as the net periodic pension cost in the following financial year. Similarly, changes in the expected return on plan assets assumption can result in significant changes in the net periodic pension cost of the following financial year. For further information see “Item 5: Operating and Financial Review and Prospects – Critical Accounting Policies” and Note 19 to the Consolidated Financial Statements.

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. Celanese’s obligation regarding two of these agreements had been settled as of December 31, 2002. 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.

Celanese has made payments through December 31, 2002 of €32 million for environmental contamination liabilities in connection with the divestiture agreements. As of December 31, 2002, Celanese has reserves of €57 million 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 either 2001 or 2002 in connection with this indemnity.

Under the demerger agreement, Celanese will also be responsible, directly or indirectly, for all of Hoechst’s obligations to past employees of 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 that 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 28.8 percent of the Celanese shares outstanding as of December 31, 2002. Kuwait Petroleum Corporation thus has 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 AG was incorporated as Diogenes Erste Vermögensverwaltungs GmbH as a stock corporation organized under the laws of the Federal Republic of Germany on November 22, 1996. It changed its name to Celanese AG upon its demerger from Hoechst on October 22, 1999. 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, it expanded its operations in the United States and changed its name to Celanese. 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 acetal 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 acetal 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, acetate 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 2002, Celanese had net sales of €4,325 million and an operating profit of €155 million from continuing operations. At December 31, 2002, Celanese had approximately 10,700 employees worldwide. As of December 31, 2002, Celanese had 26 production plants and four 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 2002, 52 percent of net sales was derived from sales in North America, 36 percent from sales in Europe, 11 percent from sales in Asia and Australia and 1 percent from sales in the rest of the world. Celanese has a large and diverse global customer base consisting principally of major industrial companies. In 2002, sales to the 10 largest customers of Celanese accounted for less than 25 percent of its net sales and the single largest customer represented less than 5 percent of its net sales.

Celanese’s aggregate capital expenditures for property, plant and equipment were €218 million in 2002, €217 million in 2001, and €218 million in 2000. North America and Europe accounted for 53 percent and 47 percent, respectively, of Celanese’s capital expenditures in 2002. 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 – 2002 Compared to 2001 – Discontinued Operations for the Years Ended December 31, 2002, 2001 and 2000” and Note 6 to the Consolidated Financial Statements.

As of December 31, 2002, Celanese had 50,058,476 shares outstanding and approximately 100,000 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, and as of December 31, 2002, emulsions and emulsion powders. 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. Emulsions and emulsion powders are a key component of water-based quality surface coatings, adhesives, non-woven textiles and other applications. 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. The emulsions and emulsion powders business, which Celanese acquired from Clariant AG on December 31, 2002, holds a number two position in conventional emulsions (excluding styrene butadiene resins or SBRs) in Europe and a number one position in European VAM-based emulsions. The business is also a leading supplier of emulsion powders globally.

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 tow (filter products) and acetate filament. Products from this segment are found in cigarette filters, fashion apparel, linings, and home furnishings. Celanese is one of the world’s leading producers of acetate tow and acetate filament, 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 Korea 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 consists of Nutrinova, the food ingredients business, which produces and sells high intensity sweeteners and food protection ingredients, such as sorbic acids and sorbates, for the food, beverage and pharmaceuticals industries.

The table below illustrates each segment’s share of total segment net sales to external customers for the years ended December 31, 2002, 2001 and 2000.

Net Sales to External Customers by Segment

	Year Ended December 31,
	2002					2001					2000
	€		% of Segment(1)			€		% of Segment(1)			€		% of Segment(1)
	(in millions, except percentages)
Acetyl Products		1,844		43	%		2,062		45	%		2,023		42	%
Chemical Intermediates		825		19	%		938		20	%		975		20	%
Acetate Products		670		16	%		762		16	%		756		16	%
Technical Polymers Ticona		757		18	%		773		16	%		923		19	%
Performance Products		161		4	%		159		3	%		124		3	%

(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, which consists primarily of general corporate functions, captive insurance companies, 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. consists of the high performance polymer, polybenzimidazole or PBI, and the Vectran® polymer fiber product lines.

Strategy

Celanese is continuing on its strategic course of pursuing growth opportunities, driving productivity, optimizing its portfolio, and ensuring sound financial management.

Celanese is pursuing growth opportunities internally by increasing and creating more efficient production capacities and developing new products and externally by extending its value chain and portfolio into higher value products and strengthening its presence in various geographic regions.

Celanese is extending its strong value chain in its Acetyl Products segment into higher value products. At the end of 2002, it acquired Clariant AG’s European emulsions and global emulsion powders business for €147 million. The business holds leading positions in emulsions and emulsion powders in Europe and globally. The products serve as the primary ingredients in quality surface coatings, adhesives, non-woven textiles and other applications.

Early in 2002, Celanese and Hatco Corporation formed EsteCH, a joint venture for neo polyol esters, a product used in synthetic lubricants for specialized applications in the aerospace, automotive and refrigeration industries. EsteCH began construction of a neo polyol esters plant at Celanese’s Oberhausen, Germany site in October 2002. The plant is scheduled to start up in the fourth quarter of 2003. Celanese will provide the joint venture with its most important raw materials, carboxylic acids and polyols.

With the completion of its 30,000 ton GUR® ultra-high molecular weight polyethylene plant in Bishop, Texas, Celanese doubled its capacity for this highly wear-resistant polymer and further improved manufacturing efficiencies and product quality, placing Celanese in a position to meet growing market demand. The expansion of its Vectra® liquid crystal polymer plant in Shelby, North Carolina to 6,000 tons per year anticipates customer needs for both existing and emerging markets, such as medical applications. At the beginning of 2002, the U.S. Food and Drug Administration approved Vectra’s use in packaging materials for pharmaceuticals and food ingredients. The expansion of its polyacetal facility in Kelsterbach, Germany to 100,000 metric tons per year, which began in the fourth quarter of 2002, will enable Celanese to produce an even greater variety of standard and specialty products to meet customer demand.

Celanese also made major progress in developing new products. In October 2002, the company opened the world’s first pilot plant to manufacture high-temperature membrane electrode assemblies for use in fuel cells. Located in Frankfurt, Germany, the plant will allow Celanese to supply its partners with product and to further develop its fuel cell technology for automotive, telecommunication and residential uses.

In 2002, Celanese’s Nutrinova food ingredients business began market development of the omega-3 fatty acid, docosahexanoeic acid (DHA), which will be sold under the brand name DHActive™. The product has a broad range of health benefits for use in food, dietary supplements, pharmaceuticals and animal feed.

During 2002, Ticona continued market development for Topas® cycloolefin copolymers, or COCs, in medical, optical and film applications. Future plans for the COC business include exploring strategic alliances with suitable partners, to develop this business fully and more quickly.

Celanese is building on its over 30 years of experience in Asia to expand its already strong presence in this growing market. Celanese’s Ticona segment and its existing Asian partners announced plans to construct a 60,000-metric ton polyacetal plant in China, the world’s fastest growing engineering plastics market. The new plant is expected to start operations during 2005.

Celanese’s Acetyl Products segment, with a major production facility in Singapore and a growing sales presence in China, is in a good position to support the expanding Asian market while exploring additional growth opportunities.

Celanese is continuing to strive for cost and productivity leadership by using a number of operational excellence tools, such as Six Sigma

Celanese is enjoying the benefits of its Focus and Forward restructuring initiatives that commenced in 2001. These initiatives included the closure of high-cost facilities and the simplification of administrative structures, which resulted in the elimination of about 1,500 positions. The initiatives generated about €100 million of savings in 2002. Going forward, annual savings are estimated to increase to approximately €140 million.

Celanese uses best practices to reduce costs and increase equipment reliability in maintenance, project engineering and energy utilization. Advanced process control projects help to generate significant savings in energy and raw materials while increasing yields in production units. Most significantly, Six Sigma, a structured process based on statistics for achieving greater productivity and growth, has become a pervasive and important tool for projects ranging from lowering costs to increasing capacity and from reducing working capital to minimizing capital expenditures required for expansion. More than 80 employees have been trained as “black belts” providing leadership on Six Sigma projects.

Celanese is optimizing its business portfolio to focus on businesses in which it can expand its market, cost and technology leadership over the long term.

Celanese continues to explore strategic options to improve its underperforming Chemical Intermediates segment. In a move to improve the competitiveness of its oxo business, Celanese reached agreement with Degussa AG to establish a 50/50 joint venture of their European propylene-based oxo chemicals businesses. The European Commission is currently conducting a detailed investigation into the proposed joint venture. Celanese expects regulatory approval in 2003.

Celanese also divested its global allylamines and U.S. alkylamines businesses with production sites in Portsmouth, Virginia and Bucks, Alabama.

In another transaction, Celanese sold its non-core Trespaphan OPP films business in 2002 for a value of €209 million to a consortium consisting of the Dor-Moplefan Group and Bain Capital, Inc. After purchase price adjustments, Celanese received net proceeds of €112 million. See also “Acquisitions and Divestitures” and Note 6 to the Consolidated Financial Statements.

Celanese is pursuing a policy of sound financial management

In 2002, Celanese strengthened its financial position. Through strong cash flow management in each of its business segments and net proceeds from divestitures, the company reduced net financial debt by 40% from €835 million at year end 2001 to €497 million at year end 2002. The company’s strong cash position also enabled it to finance an acquisition, contribute over €100 million to its U.S. pension funds, and resume share repurchases. This policy of financial discipline enables Celanese to continue pursuing a growth strategy and to return value to its shareholders. See “Item 5. Operating and Financial Review and Prospects – Financial Highlights”

Business Segments

Acetyl Products

The Acetyl Products segment consists of four business lines: Acetyl Chain, Acetyl Derivatives and Polyols, Polyvinyl Alcohol and Emulsions. All business lines in this segment conduct business using the “Celanese” trade name, except Polyvinyl Alcohol, which uses the trademark Celvol®, and Emulsions and Emulsion Powders, which use the trademarks Mowilith® and Celvolit®. The following table lists key acetyl products and their major markets.


Key Acetyl Products		Major Markets

Methanol		Formaldehyde and Acetic Acid

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

Emulsions		Water-Based Quality Surface Coatings, Adhesives, Non-Woven Textiles

Emulsion Powders		Building Products

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, as well as for 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. Celanese manufactures vinyl acetate monomer for its own use, as well as for third parties.

•

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 data from the 2002 Chemical Economics Handbook, 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 and ethylene, which are purchased from numerous sources; carbon monoxide, which is 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 introduced 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™, enables significant increases in production efficiencies, lower operating costs and increases in capacity at 10 to 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, methanol and acetaldehyde, 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’s last article on PVOH in early 2001, 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. (“Air Products”) in September 2000.

Emulsions. Celanese purchased the European emulsions and global emulsion powders business of Clariant AG on December 31, 2002. The products in this business are sold under the Mowilith® and Celvolit® brands and include conventional emulsions, high-pressure vinyl acetate ethylene emulsions, and powders. Emulsions and emulsion powders are made from vinyl acetate monomer, acrylate esters and styrene. Emulsions are a key component of water-based quality surface coatings, adhesives, non-woven textiles and other applications. According to Kline & Co., a chemicals industry consultant, in 2001 the business held a number two position in emulsions (excluding SBRs) in Europe and a number one position in European VAM-based emulsions. The business is also a leading supplier of emulsion powders globally.

Facilities

The Acetyl Products segment has production sites in the United States, Canada, Mexico, Singapore, Spain and Germany. The emulsions and emulsion powders businesses have production sites in Germany, Spain, Sweden and Slovenia, as well as tolling arrangements in the United Kingdom, France and Greece. 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 are supplied from the Clear Lake, Texas plant. Customers who purchased pentaerythritol from the Edmonton facility are supplied from the Bishop, Texas plant.

Capital Expenditures

The Acetyl Products segment’s capital expenditures for property, plant and equipment were €40 million, €43 million, and €80 million for the years 2002, 2001 and 2000, respectively. The capital expenditures incurred during the last two years related to efficiency and safety improvement-related items associated with the normal operations of the business, while the capital expenditures incurred during 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, 2002, 2001 and 2000.

Net Sales by Destination – Acetyl Products

	Year Ended December 31,
	2002					2001					2000
	€		% of Segment			€		% of Segment			€		% of Segment
	(in millions, except percentages)
North America		832		45	%		996		48	%		1,021		50	%
Europe/Africa		590		32	%		678		33	%		650		32	%
Asia/Australia		368		20	%		323		16	%		300		15	%
Rest of World		54		3	%		65		3	%		52		3	%

The Acetyl Products segment markets its products both directly to customers and through distributors. It also utilizes a number of “e-channels”, including its website at www.chemvip.com, as well as system to system linking through its industry portal, Elemica.

In the acetyl chain business line, the methanol market is regional and highly dependent on the demand for products made from methanol. In addition to its own demands for methanol, Celanese’s production is sold to a few regional customers who are manufacturers of chemical intermediates and to a lesser extent, by manufacturers in the wood products industry. 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 sale to a few regional customers that include manufacturers in the wood products industry. 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.

Emulsions and emulsion powders are sold to a diverse group of regional and multinational customers. Customers for emulsions are manufacturers of water-based quality surface coatings, adhesives, and non-woven textiles. Customers for emulsion powders are primarily manufacturers of building products.

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., 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., Showa Denko K.K., and Kuraray Co. Ltd.

Chemical Intermediates

The Chemical Intermediates segment consists of three business lines: acrylates, oxo products and specialties. Each business line in this segment conducts 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		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 the following acrylate esters: 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:

•

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 mainly 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. A substantial portion of the oxo business line’s products is consumed by other Celanese business lines.

Prices for oxo products, like other basic chemical commodity prices, follow cyclical trends.

The primary raw materials for these products are propylene and ethylene, both of which are purchased from a variety of sources, and synthesis gas, which is manufactured from crude oil or natural gas.

In December 2002, Celanese and Degussa AG completed negotiations to set up a 50-50 joint venture for oxo products. Under the terms of the joint venture, Celanese will merge its commercial, technical and operational C3-oxo business activities in Oberhausen, Germany with those of Degussa’s Oxeno subsidiary. The European Commission is currently conducting a detailed investigation into the proposed joint venture. Celanese expects regulatory approval in 2003.

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.

In March 2002, Celanese formed EsteCH, a joint venture with Hatco Corporation, a leading producer of synthetic lubricants, for the production and marketing of neopolyol esters or NPEs. This newly created joint venture, in which Celanese holds a 51 percent interest, is building and will operate a 7,000 metric ton per year NPE plant at Celanese’s Oberhausen, Germany site. The plant is expected to come on stream in the fourth quarter of 2003. Neopolyol esters are used as base stocks for synthetic lubricants in refrigeration, automotive, aviation and industrial applications, as well as in hydraulic fluids. Celanese will supply EsteCH with carboxylic acids and polyols, the main raw materials for producing NPEs.

In December 2002 Celanese sold its global allylamines and U.S. alkylamines businesses, including its production sites located in Bucks, Alabama and Portsmouth, Virginia, to U.S. Amines Ltd. See “Acquisitions and Divestitures” and Note 6 to the Consolidated Financial Statements.

Facilities

The Chemical Intermediates segment has production sites in the United States, Germany and Mexico.

Capital Expenditures

The Chemical Intermediates segment’s capital expenditures for property, plant and equipment were €70 million, €30 million, and €39 million for the years 2002, 2001 and 2000, respectively. Capital expenditures in all three years related to efficiency and safety improvement-related items associated with the normal operations of the business. The capital expenditures incurred in 2001 and 2002 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 is expected to improve reliability and reduce 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, 2002, 2001 and 2000.

Net Sales by Destination – Chemical Intermediates

	Year Ended December 31,
	2002					2001					2000
	€		% of Segment			€		% of Segment			€		% of Segment
	(in millions, except percentages)
North America		371		45	%		459		48	%		463		47	%
Europe/Africa		331		40	%		355		38	%		378		39	%
Asia/Australia		91		11	%		100		11	%		115		12	%
Rest of World		32		4	%		24		3	%		19		2	%

The Chemical Intermediates segment markets its products both directly to customers and through distributors. It also utilizes a number of “e-channels”, including its website at www.chemvip.com, as well as system to system linking through its industry portal, Elemica.

Celanese’s acrylates business line serves customers throughout the world in various applications, including paints and coatings, adhesives and water treatment. Celanese’s oxo business line has a broad customer base, and Celanese has long-standing relationships with most of these customers. Both the acrylates and the oxo markets are characterized by oversupply and numerous competitors.

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 filter products and acetate filament. 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 Tow		Cigarette Filters

Acetate Filament		Fashion Apparel, Linings and Home Furnishings

Business Lines

Products from the two major business lines are found in cigarette filters, fashion apparel, linings and home furnishings. According to the 2002 Stanford Research Institute International Chemical Economics Handbook, Celanese is the world’s leading producer of acetate fibers, including production of its joint ventures in Asia.

Celanese produces acetate flake by processing wood pulp with acetic anhydride. 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 filter products business line produces acetate tow, which is used primarily in cigarette filters. Currently, the acetate tow market is characterized by stability and slow growth.

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, in 2002, 20 percent of Celanese’s sales of acetate tow were sold to the state-owned tobacco enterprises, the largest single market for tow in the world. As demand for acetate tow in China exceeds local supply, Celanese and its Chinese partners are evaluating expansion at their three manufacturing joint ventures. Although increases in manufacturing capacity of the joint ventures would likely reduce the volume of Celanese’s future direct sales of cellulose acetate tow to China, the dividends paid by the joint ventures to Celanese would likely increase once the expansions are complete. A final decision on expansion is expected by mid-2003.

The acetate filament business line is a supplier to the textile 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 and this trend is expected to continue. 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 and other filaments 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.

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, some of which continued into 2002:

•

The Rock Hill, South Carolina acetate filament production was shut down at the end of the fourth quarter 2001. The Rock Hill site continues to produce acetate flake. The Narrows, Virginia and Ocatlán, Mexico facilities continue to produce acetate filament.

•

Lanaken, Belgium acetate filament production was shut down in the second quarter of 2002. The Lanaken site continues to produce acetate tow.

•

In 2002 manufacturing costs at the Ocotlán, Mexico facility were reduced through downsizing and renegotiation of the collective bargaining agreements with employees in the fourth quarter of 2001.

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 €31 million, €35 million, and €30 million for the years 2002, 2001 and 2000, respectively. The capital expenditures incurred during these years related to efficiency, environmental and safety improvement-related items associated with the normal operations 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, 2002, 2001 and 2000.

Net Sales by Destination – Acetate Products

	Year Ended December 31,
	2002					2001					2000
	€		% of Segment			€		% of Segment			€		% of Segment
	(in millions, except percentages)
North America		199		30	%		253		34	%		312		42	%
Europe/Africa		177		26	%		217		28	%		176		23	%
Asia/Australia		272		41	%		270		35	%		245		32	%
Rest of World		22		3	%		22		3	%		23		3	%

Sales in the acetate filter products industry are principally to the major tobacco companies that account for a majority of worldwide cigarette production. Celanese’s contracts with most of its customers, including its largest customer, with whom it has a long-standing relationship, are entered into on an annual 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.

In the acetate filament industry, Celanese’s sales are made to textile companies that 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. Many North American manufacturers in the textile chain have reduced capacity, vertically integrated with other manufacturers or exited from the business. Although demand in the Asian market continues to rise, intense competition has eroded pricing and reduced profitability. Product substitution to polyester and other fibers has also occurred. Celanese’s acetate filament business has been adversely affected by these trends in the industry.

Celanese is participating in the expanding Asian filament market through its marketing alliance with Teijin Limited. Teijin agreed to assist Celanese with qualifying its acetate filament with customers beginning in January 2002, by, among other things, providing Celanese with marketing and technical support. Teijin discontinued acetate filament production in March 2002.

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®/Riteflex®/Impet® (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. For example, Ticona worked very closely with its customers to adopt a Fortron® (PPS)-glass fabric composite for the inboard leading-edge nose on the wings of the Airbus A340-500 and -600 series. Ticona is also developing new products such as Topas®, a metallocene catalyst based cycloolefin copolymer, or COC. Topas is developing markets and applications where transparency, high temperature resistance and water vapor 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, generally 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. Polyacetals pricing, mainly in standard grades, is, however, somewhat more price competitive, with many 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 Korea 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 and methanol in the United States from Celanese’s Acetyl Products segment and, in Europe, manufactures formaldehyde from purchased methanol.

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 prostheses. The basic raw material for GUR is ethylene.

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 widely used 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 a contract for the supply of nylon base polymers to produce Celanese nylon 6/6 compounds.

Facilities

Ticona has polymerization, compounding and research and technology centers in Germany and the United States, as well as additional compounding facilities in Brazil.

Capital Expenditures

Ticona’s capital expenditures for property, plant and equipment were €66 million, €97 million, and €58 million for the years 2002, 2001 and 2000, respectively. Ticona had expenditures in each of these three years relating to efficiency and safety improvement-related items associated with the normal operations of the business. In addition, Ticona had expenditures in each of these three years for significant capacity expansions at its Bishop, Texas and Shelby, North Carolina sites. Ticona doubled its U.S. capacity for GUR PE-UHMW by building a new 30,000 metric tons per year facility in Bishop, Texas, replacing the existing plant in Bayport, Texas. The new plant came on stream in the third quarter of 2002. Ticona also significantly increased the capacity of its Vectra® LCP plant in Shelby, North Carolina in the second quarter of 2002. In the fourth quarter of 2002, Ticona commenced a 23,000 metric ton expansion of its polyacetals facility in Kelsterbach, Germany. The expanded capacity in Kelsterbach is scheduled to come on stream in the second half of 2003.

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, 2002, 2001 and 2000.

Net Sales by Destination – Technical Polymer Ticona Segment

	Year Ended December 31,
	2002					2001					2000
	€		% of Segment			€		% of Segment			€		% of Segment
	(in millions, except percentages)
North America		400		52	%		420		54	%		518		56	%
Europe/Africa		318		42	%		317		41	%		360		39	%
Asia/Australia		19		3	%		14		2	%		22		2	%
Rest of World		20		3	%		22		3	%		23		3	%

Ticona’s consolidated net sales do not include the sales of Polyplastics, Korea 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 be substantially higher. A number of Ticona’s polyacetals customers, particularly in the appliance, electrical components, toys and certain sections of the electronics/telecommunications fields, have moved tooling and molding operations to Asia, particularly Southern China. To meet the expected increased demand in this region, Ticona, along with Polyplastics, Mitsubishi Gas Chemical Company Inc., and Korea Engineering Plastics agreed on a joint venture to construct and operate a world-scale 60,000 metric ton polyacetals facility in China. When completed, Ticona will indirectly own an approximate 38 percent interest in this joint venture. Work on the new facility is scheduled to begin in mid-to-late 2003 and the new plant is expected to start operations in the second quarter of 2005.

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 assist them to develop and improve specialized applications and systems. Ticona has long-standing relationships with most of its major customers, but it also uses distributors, as well as a number of electronic channels, such as its BuyTiconaDirect™ on-line ordering system, and other electronic marketplaces 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.

Competition

Ticona’s principal competitors include BASF, Bayer AG, DuPont, General Electric Company and Solvay S.A. Smaller regional competitors include Asahi/America, Inc., DSM NV, Mitsubishi Plastics, Inc., Chevron Phillips Chemical Company, L.P., Polialden Petroquimica S.A., Teijin and Toray Industries Inc.

Performance Products

The Performance Products segment consists of the food ingredients business conducted by Nutrinova.

This business uses its 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

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

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

Business Lines

Nutrinova’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. In addition, in July 2002 the Protos-Biotech business of Celanese Ventures, including its DHActive™ omega-3 fatty acid, docosahexanoeic acid (DHA), and other high-quality molecules, was transferred to Nutrinova.

Acesulfame-K, a high intensity sweetener marketed under the trademark Sunett®, is used in a variety of beverages, confections and dairy products throughout the world. The primary raw materials for this product are diketene and sulfur trioxide. Sunett pricing for targeted applications reflects the value added in the precision formulations and extensive technical services provided. Nutrinova’s strategy is to be the most reliable and highest quality producer of this product, and to develop new applications and expand into new markets. 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’s European and U.S. patents for making Sunett expire in 2005.

Nutrinova’s food protection ingredients are used in foods, beverages and personal care products. The primary raw materials for these products are ketene and crotonaldehyde. Sorbates pricing is extremely sensitive to demand and industry capacity and is not necessarily dependent on the prices of raw materials.

Facilities

Nutrinova has production facilities in Germany, as well as sales and distribution facilities in all major world markets.

Capital Expenditures

The Performance Products segment’s capital expenditures for property, plant and equipment were €4 million, €2 million, and €2 million for the years 2002, 2001 and 2000, respectively. The capital expenditures incurred during these years related to efficiency and safety improvement items associated with the normal operation of the business.

Markets

The following table illustrates the destination of the net sales of the Performance Products segment by geographic region for the years ending December 31, 2002, 2001 and 2000.

Net Sales by Destination – Performance Products

	Year Ended December 31,
	2002					2001					2000
	€		% of Segment			€		% of Segment			€		% of Segment
	(in millions, except percentages)
North America		60		37	%		57		36	%		58		47	%
Europe/Africa		58		36	%		58		37	%		53		43	%
Asia/Australia		27		17	%		26		16	%		5		4	%
Rest of World		16		10	%		18		11	%		8		6	%

Nutrinova directly markets Sunett primarily to a limited number of large multinational and regional customers in the beverage and food industry under long-term and annual 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. Nutrinova is currently developing markets and new applications for DHActive. Potential application areas include functional foods and beverages, dietary supplements, clinical nutrition and pharmaceutical end-uses.

Competition

The principal competitors for Nutrinova’s Sunett sweetener are Holland Sweetener Company, The Nutrasweet Company, Ajinomoto Co., Inc. and several Chinese manufacturers. In sorbates, Nutrinova competes with Nantong AA, Daicel, Chisso Corporation, Yu Yao/Ningbo, Yancheng AmeriPac and other Japanese and Chinese manufacturers of sorbates.

Other Activities

Other Activities includes revenues mainly from the captive insurance companies, Celanese Ventures GmbH, Celanese Advanced Materials, Inc., as well as corporate activities, several service companies and other ancillary businesses, which do not have significant sales.

Celanese’s two wholly-owned captive insurance companies are a key component of Celanese’s global risk management program, as well as a form of self insurance for the property, liability and workers compensation risks of Celanese. The captive insurance companies issue insurance policies to Celanese subsidiaries to provide consistent coverage amid fluctuating costs in the insurance market and to lower long-term insurance costs by avoiding or reducing commercial carrier overhead and regulatory fees. The captive insurance companies issue insurance policies and coordinate claims handling services with third party service providers. They retain risk at levels approved by the board of management and obtain reinsurance coverage from third parties to limit the net risk retained. One of the captive insurance companies also insures certain third party risks.

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 high temperature membrane electrode assemblies or MEAs for fuel cells, and it inaugurated the world’s first pilot plant for MEAs at the Celanese’s Frankfurt site in the third quarter of 2002. Celanese Ventures is also developing new catalysts for high performance polymers. Celanese Advanced Materials consists of 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

Celanese completed the following acquisitions of businesses during 2002:

•

As a part of its strategy of forward integration, Celanese purchased the European emulsions and global emulsion powders business of Clariant AG on December 31, 2002 valued at €147 million. After purchase price adjustments and assumption of liabilities, Celanese paid €125 million cash for the net assets of this business.

Celanese completed the following acquisitions of businesses during 2000:

•

In May 2000, Celanese acquired 100 percent of Axiva GmbH, a process technology and engineering business, from Aventis for a purchase price of €38 million. In October 2000, Celanese sold 75 percent of the process technology and engineering business of Axiva GmbH to Siemens AG and retained selected projects, which it continues to operate in the process technology entity, which was renamed Celanese Ventures GmbH. Celanese received gross proceeds of €10 million on the sale.

•

In September 2000, Celanese completed the acquisition of the polyvinyl alcohol ("PVOH") business of Air Products and Chemicals, Inc. for U.S. $326 million (€359 million).

Celanese made the following divestitures during 2002:

•

Effective January 1, 2002, Celanese sold its interest in InfraServ GmbH & Co. Deponie Knapsack KG (“Deponie”) to Trienekens AG.

•

In December 2002, Celanese sold Trespaphan, its global oriented polypropylene film business, to a consortium consisting of the Dor-Moplefan Group and Bain Capital, Inc. This business is reflected as a component of discontinued operations in the Consolidated Financial Statements in accordance with SFAS No. 144.

•

During 2002, Celanese sold its global allylamines and U.S. alkylamines businesses to U.S. Amines Ltd. This business is reflected as a component of discontinued operations in the Consolidated Financial Statements in accordance with SFAS No. 144.

Celanese completed the following divestitures during 2001:

•

In January 2001, Celanese sold its investment in InfraServ GmbH & Co. Münchsmünster KG to Ruhr Oel GmbH. See Note 10 to the Consolidated Financial Statements

•

In January 2001, Celanese sold its CelActiv™ and Hoecat® catalyst business to Synetix.

•

In April 2001, Celanese sold NADIR filtration GmbH, formerly Celgard GmbH, to KCS Industrie Holding AG. This divestiture was classified as a discontinued operation.

•

In June 2001, Celanese sold its ownership interest in Hoechst Service Gastronomie GmbH to Eurest Deutschland GmbH and InfraServ GmbH & Co. Höchst KG.

•

In October 2001, Celanese sold its ownership interest in Covion Organic Semiconducters GmbH, a developer and producer of light-emitting organic polymers, to Avecia, its joint venture partner in Covion Organic Semiconductors GmbH.

Celanese completed the following divestitures during 2000:

•

In January 2000, Celanese sold its phosphorous and phosphorous derivatives business, conducted by the Thermphos Group, to the Thermphos Group’s management.

•

In July 2000, Celanese sold its 50 percent interest in Vinnolit Kunststoff GmbH, its joint venture with Wacker Chemie GmbH, and its 100 percent interest in Vintron GmbH, both European producers of high performance polyvinyl chloride or PVC products, to institutional funds managed by Advent International Corporation. Pursuant to the sale agreement, the buyer had been granted limited rescission rights which expired on December 15, 2001.

For further information on the acquisitions and divestitures discussed above, see “Business Segments – Acetyl Products,” “Item 5. Operating and Financial Reviews and Prospects – Summary of Consolidated Results – 2002 Compared with 2001 – Discontinued Operations for the Years Ended December 31, 2002, 2001 and 2000” and Note 6 to the Consolidated Financial Statements.

Raw Materials and Energy

Celanese purchases a variety of raw materials from sources in many countries for use in its production processes. Celanese has a policy of maintaining, when available, multiple sources of supply for materials. However, some of Celanese’s individual plants may have single sources of supply for some of their raw materials, such as carbon monoxide, acetaldehyde and wood pulp. 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. In the third quarter of 2002, the same supplier had other operational difficulties, which were addressed during the fourth quarter. 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. Even if Celanese has multiple sources of supply for a raw material, there can be no assurance that these sources can make up for the loss of a major supplier. Nor can there be any guarantee that profitability will not be affected should Celanese be required to qualify additional sources of supply in the event of the loss of a sole supplier. In addition, the price of raw materials varies, often substantially, from year to year.

A substantial portion of Celanese’s products and raw materials are commodities whose prices fluctuate as market supply/demand fundamentals change. Celanese’s production facilities rely largely on coal, fuel oil, natural gas and electricity for energy. Rising coal prices in the United States leveled off at the end of 2001 and remained at these levels through 2002. Natural gas prices continued to decline through the first half of 2002 but began to increase in the third and fourth quarters. Most of these raw materials for Celanese’s European operations are centrally purchased by a subsidiary of Celanese, which also buys raw materials on behalf of third parties. Celanese manages its exposure through the use of derivative instruments and forward purchase contracts for commodity price hedging, entering into long-term supply agreements, and multi-year purchasing and sales agreements. Celanese’s policy allows the forward purchase of up to 80 percent of its natural gas and butane requirements, generally for up to 18 months using forward purchase or cash-settled swap contracts. During 2002, Celanese entered into forward purchase and cash-settled swap contracts for approximately 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, or

if it elects to replace them, Celanese may have to do so at higher costs. In the first quarter of 2003, Celanese also purchased option contracts related to approximately 5 to 10 percent of its ethylene requirements. In addition, in 2002 Celanese pre-paid U.S. $25 million (€24 million) in a cost-based supply agreement and anticipates additional payments approximating €70 million over the next three years. Although Celanese seeks to offset 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 modify its practice of purchasing a portion of its commodity requirements forward, and consider utilizing a variety of other raw material hedging instruments in addition to forward purchase contracts in accordance with changes in market conditions.

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 relocated research and development functions in the United States to the Bishop, Texas and Clear Lake, Texas plants during the second half of 2002. 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 concentrating on developing new fabrics using acetate filament and new applications for other acetate materials, such as their use in disposable consumer materials.

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 at Nutrinova’s Frankfurt, Germany location. They are directed towards expanding its existing technologies and developing new applications for existing products in close cooperation with its customers.

Celanese’s innovative products subsidiary, Celanese Ventures GmbH, promotes research projects that lie outside 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. 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 2002, 2001 and 2000 were €74 million, €87 million and €87 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 – 2002 Compared with 2001.”

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 and process 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. For example, in 2002, Ticona doubled the annual number of invention disclosures to over forty. Celanese monitors its competitors and vigorously challenges patent and trademark infringement. For example, the Acetyl Products segment maintains a strict patent enforcement strategy, which has resulted in favorable outcomes in a number of patent infringement matters in Europe, Asia and the United States. Celanese is currently pursuing a number of matters relating to the infringement of its acetic acid patents. Some of Celanese’s earlier acetic acid patents will expire in 2007; other patents covering acetic acid are presently pending.

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. Soil and groundwater contamination has occurred at some Celanese sites, and might occur or be discovered at other sites.

In December 1997, the Conference of the Parties of the United Nations Framework Convention on Climate Change drafted the Kyoto Protocol, which would establish significant emission reduction targets for six gases considered to have global warming potential (referred to as greenhouse gases) and would drive mandatory reductions in developed nations subject to the Protocol. To date, the Protocol has not been adopted by enough of the larger, industrialized countries (defined in Annex I to the Protocol) to come into effect. Nevertheless, Germany and other countries where Celanese has interests have made commitments to the Kyoto Protocol and are in various stages of formulating applicable regulations. The United States has rejected the approach taken in the Protocol and is looking at other potential solutions.

In 2002, President Bush announced new climate change initiatives for the United States. Among the policies to be pursued is a voluntary commitment to reduce the “greenhouse gas intensity” of the U.S. economy by 18 percent within the next ten years. The Bush Administration is seeking to partner with various industrial sectors, including the chemical industry, to reach this goal. The American Chemistry Council, of which Celanese is a member, has committed to pursue additional reductions in greenhouse gas intensity toward an overall target of 18 percent by 2012, using 1990 emissions intensity as the baseline. Celanese currently emits carbon dioxide and smaller amounts of methane and experiences some losses of polyfluorinated hydrocarbons used as refrigerants. Celanese has invested and continues to invest in improvements to its processes that increase energy efficiency and decrease greenhouse gas intensity.

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, various draft regulations under consideration in the United States, including the Miscellaneous Organic National Emissions Standards for Hazardous Air Pollutants regulations, and various approaches to regulating boilers and incinerators could impose additional requirements on Celanese’s operations. Celanese’s worldwide expenditures in 2002, including those with respect to third party and divested sites, for compliance with environmental control regulations and internal company initiatives totaled €102 million, of which €4 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 vinyl acetate monomer or VAM, which Celanese also produces. 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 labelling requirements, should apply only to finished products that contain specified threshold concentrations of a particular chemical. In the case of VAM, a final ruling is not expected until the end of 2003. Celanese and other VAM producers are participating in this process with detailed scientific analyses supporting the industry’s position that VAM is not a probable human carcinogen and that labeling of final products should not be required but that, if it is, should only be at relatively high ppm levels. 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, regulatory agencies in other jurisdictions or private individuals regarding the clean-up of sites that Celanese owns, owned, operated or where waste from its operations was disposed, treated or recycled. 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, or regulatory requirements in other jurisdictions, or through obligations retained by contractual agreements for investigation and clean-up costs at approximately 50 sites. At many 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. 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 €5 million for the three years ended December 31, 2002, with expenditures in no year greater than €2 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. In March 2002, Celanese sold 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 Umwelt AG. RWE Umwelt is 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) were transferred to the buyer upon closing of the sale.

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 in which Celanese has an interest, have recorded provisions totaling approximately €58 million as of December 31, 2002. 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. Likewise, in certain circumstances Celanese could be responsible for the elimination of residual contamination on a few sites that were not transferred to InfraServ companies, in which case Hoechst must reimburse Celanese for two-thirds of any costs so incurred.

Some of Celanese’s facilities in Germany are over 100 years old, and there may be significant contamination at these facilities. With respect to its German sites, as with its other 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. As of December 31, 2002, Celanese has reserves of €199 million for environmental matters worldwide.

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. Celanese has made payments through December 31, 2002 of €32 million for environmental contamination liabilities in connection with the divestiture agreements. As of December 31, 2002, Celanese has reserves of €57 million for this contingency and may be required to record additional reserves in the future. See Note 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%

Grupo Celanese SA	Mexico		99.88%

Celanese Singapore Pte. Ltd.	Singapore		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, 2002, 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 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 of this facility is owned by a joint venture	Acetic acid Methanol⁽¹⁾ Vinyl acetate monomer

Edmonton, Alberta, Canada	Owned	Formaldehyde Methanol

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

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

Koper, Slovenia⁽²⁾	Owned	Conventional emulsions

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

Tarragona, Spain⁽²⁾	Owned	Vinyl acetate ethylene emulsions

Tarragona, Spain⁽²⁾	Leased	Conventional emulsions

Perstorp, Sweden⁽²⁾	Owned	Conventional emulsions Vinyl acetate ethylene emulsions

⁽¹⁾

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

⁽²⁾

Acquired on December 31, 2002 from Clariant AG.


Chemical Intermediates

Site	Leased/Owned	Products/Function

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

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. Oberhausen KG in which Celanese holds an 84.0 percent limited partnership interest	Butanol Dioctyl phthalate 2-Ethylhexanol n/i-Butyraldehyde Propanol Amines

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


Acetate Products

Site	Leased/Owned	Products/Function

Edmonton, Alberta, Canada	Owned	Tow, Flake

Lanaken, Belgium	Owned	Tow

Narrows, Virginia, USA	Owned	Tow, Filament, Flake

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

Bishop, Texas, USA	Owned	Celanex® GUR® Nylon Polyacetal Compounding

Florence, Kentucky, USA	Owned	Compounding

Kelsterbach, Germany	Owned by InfraServ GmbH & Co. Kelsterbach KG in which Celanese holds a 100.0% limited partnership interest	Celstran® Polyacetals Compounding

Oberhausen, Germany	Owned by InfraServ GmbH & Co. Oberhausen KG in which Celanese holds an 84.0% limited partnership interest	GUR Norbornene Topas®⁽³⁾

Shelby, North Carolina, USA	Owned	LCP⁽⁴⁾ PBT PPS Compounding

Wilmington, North Carolina, USA	Leased by a non-consolidated joint venture in which Celanese has a 50% interest	Fortron® PPS

Winona, Minnesota, USA	Owned	Celstran

⁽³⁾

Technical Polymers Ticona’s leased 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.”

⁽⁴⁾

Technical Polymers Ticona completed a significant expansion of its Vectra LCP plant in Shelby, North Carolina in the second quarter of 2002. The downturn in the telecommunications industry, a principal market for Vectra, coupled with the increased capacity, has resulted in this plant operating at significantly less than commercial capacity.


Performance Products

Site	Leased/Owned	Products/Function

Frankfurt am Main, Germany	Owned by InfraServ GmbH & Co. Höchst KG in which Celanese holds a 28.2% limited partnership interest	Sorbates Sunett®

Polyplastics has its principal production facilities in Japan, Taiwan and Malaysia. Korea 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 2002, Celanese and its consolidated subsidiaries, in the aggregate, had capital expenditures for the expansion and modernization of production, manufacturing, research and administrative facilities of €218 million. In 2001 and 2000, these expenditures amounted to €217 and €218 million, respectively. 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 of the outstanding shares of Celanese to existing Hoechst shareholders.

The Consolidated Financial Statements reflect, for the periods indicated, the financial condition, results of operations and cash flows of Celanese and its wholly-owned subsidiaries and have been presented to show separately the effects of discontinued operations. See “Summary of Consolidated Results – 2002 Compared with 2001 – Discontinued Operations for the Years Ended December 31, 2002, 2001 and 2000.”

The financial condition, results of operations and cash flow 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 €1 million of income in 2002 and expense of €496 million and €21 million in 2001 and 2000, respectively. For a further discussion of special charges, see “Summary by Business Segment – 2002 Compared with 2001 – Special Charges,” “Summary of Consolidated Results – 2002 Compared with 2001 – Special Charges,” “Summary by Business Segment – 2001 Compared with 2000 – Special Charges” and “Summary of Consolidated Results – 2001 Compared with 2000 – Special Charges.”

Effective January 1, 2002, Celanese adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, and accordingly applied the standards of the statement prospectively. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and provides that goodwill and some intangibles no longer be amortized on a recurring basis. Instead, goodwill and intangible assets with an indefinite life are subject to an initial impairment test upon adoption of SFAS No. 142 and at least annually thereafter. The related charges in 2001 were a net expense of €77 million in selling, general and administrative expense and €6 in equity in net earnings of affiliates. Additionally, SFAS No. 142 requires that any unamortized negative goodwill (excess of fair value over cost) on the balance sheet be written off immediately and classified as a cumulative effect of change in accounting principle in the consolidated statement of operations. As a result, income of €10 million was recorded to cumulative effect of changes in accounting principles in Celanese’s Consolidated Statement of Operations in the first quarter of 2002.

Effective October 2002, Celanese early adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities and accordingly applied the statement prospectively to exit and disposal activities initiated after September 30, 2002. See “ Summary of Consolidated Results – 2002 Compared with 2001 – Special Charges.”

In 2002, Celanese changed the actuarial valuation measurement date for its U.S. pension and other postretirement benefit plans from September 30 to December 31. Celanese believes this method is preferable in the circumstances because a calendar year reporting will bring the valuation date in line with Celanese’s fiscal

year-end reporting and allow for a more current measurement of the related actuarial components. Celanese accounted for this as a change in accounting principle, which resulted in a cumulative effect adjustment in 2002. As a result, income of €9 million, net of income taxes of €5 million, was recorded to cumulative effect of change in accounting principles in Celanese’s Consolidated Statement of Operations. In addition, this change reduced total 2002 pension expense by approximately €14 million.

Celanese evaluates performance based on operating profit, net earnings, cash flows and other measures of financial performance reported in accordance with U.S. GAAP. Besides these measures, earnings before interest, taxes, depreciation and amortization (“EBITDA”), excluding special charges, is considered appropriate for evaluating the performance of its operating segments as it closely reflects cash flow management. EBITDA, which may be calculated differently by other companies, is calculated by adding depreciation and amortization expense back to operating profit (loss). Celanese excludes special charges from EBITDA for better comparability between periods. EBITDA eliminates the effect of depreciation and amortization of tangible and intangible assets.

Major Events in 2002

Enhancing the value of Celanese’s portfolio:

•

Acquisition of the European emulsions and global emulsion powders business from Clariant AG, Switzerland

•

Divestiture of Trespaphan, the oriented polypropylene (OPP) film business

•

Formation of a 50/50 European joint venture with Hatco Corporation, U.S. for production and marketing of neopolyol esters, a basic raw material for synthetic lubricants

Continuing internal growth activities:

•

Start-up of a new 30,000 ton per year GUR® ultra-high molecular weight polyethylene plant in Bishop, Texas, U.S.

•

Completion of capacity expansion for Vectra® liquid crystal polymers in Shelby, North Carolina, U.S.

•

Opening of the world’s first pilot plant for high temperature membrane electrode assemblies for fuel cells in Frankfurt, Germany

•

Announcement to construct with Asian partners a world-scale 60,000 ton per annum polyacetal plant in China, with operations expected to start during 2005

Additional highlights:

•

Cost savings of an estimated €100 million achieved in 2002 associated with the Focus and Forward restructuring programs, initiated in 2001

•

Agreement with BOC p.l.c., United Kingdom to supply carbon monoxide that feeds the acetic acid production facility at the Clear Lake, Texas site in a move to decrease costs and improve efficiency

•

Divestiture of global allylamines and U.S. alkylamines business with production sites in Portsmouth, Virginia and Bucks, Alabama

•

Initiation in December 2002 of a buy back of up to 1,031,941 shares, expected to be completed by the end of April 2003

•

Expensing of stock options commenced in July 2002 at a total estimated cost of €10 million, of which approximately €3 million was recognized in 2002

•

Agreement with Degussa AG, Germany to establish a 50/50 joint venture for the European oxo chemicals business, subject to regulatory approval in 2003

•

Appointment of Dr. Andreas Pohlmann as chief administrative officer to the Board of Management, responsible for Performance Products and Celanese Ventures, and as director of personnel. He succeeds Prof. Ernst Schadow, who retired in October 2002.

Financial Highlights

	Year Ended December 31,
	2002	2002	2001		2000
	(in $ millions,⁽¹⁾ except for share and per share data)	(in € millions, except for share and per share data)
Net sales	4,535	4,325	4,777		4,885
Gross profit	715	682	645		730
Special charges	1	1	(496	)	(21	)
Depreciation and amortization	300	286	390		356
Operating profit (loss)	162	155	(488	)	87
EBITDA excluding special charges⁽²⁾	461	440	398		464
Earnings (loss) from continuing operations	117	113	(364	)	54
Earnings (loss) from discontinued operations	58	55	(21	)	4
Cumulative effect of changes in
accounting principles	20	19	—		—
Net earnings (loss)	195	187	(385	)	58
Weighted average shares — basic and diluted	50,329,346	50,329,346	50,331,847		53,293,128
Earnings (loss) per common share — basic and diluted
from continuing operations	2.32	2.25	(7.23	)	1.01
from discontinued operations	1.15	1.09	(0.42	)	0.08
from cumulative effect of change in
accounting principles	0.40	0.38	—		—
from net earnings (loss)	3.87	3.72

UNITED STATESSECURITIES 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, 2002

Commission file number 1-15419

TABLE OF CONTENTS

Part I

INTRODUCTION

BASIS OF PRESENTATION

CURRENCY TRANSLATION

FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Item 2. Offer Statistics and Expected Timetable

Item 3. Key Information

Selected Financial Data

Exchange Rate Information

Risk Factors

Item 4. Information on the Company

Introduction

History and Development of the Company

Business Summary

Segment Overview

Net Sales to External Customers by Segment

Strategy

Business Segments

Net Sales by Destination – Acetyl Products

Net Sales by Destination – Chemical Intermediates

Net Sales by Destination – Acetate Products

Net Sales by Destination – Technical Polymer Ticona Segment

Net Sales by Destination – Performance Products

Other Activities

Acquisitions and Divestitures

Raw Materials and Energy

Research and Development

Intellectual Property

Environmental and Other Regulation

Organizational Structure

Description of Property

Item 5. Operating and Financial Review and Prospects

Basis of Presentation

Major Events in 2002

Financial Highlights

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002