Celanese Corporation (NYSE:CE) Second Quarter 2022 Earnings Conference Call July 29, 2022 10:00 a. m. m. , Eastern Time
Participating companies
Brandon Ayache – Vice President, RI
Lori Ryerkerk – CEO, Chair of the Board of Directors
Scott Richardson – Chief Financial Officer
Conference Call Participants
Vincent Andrews – Morgan Stanley
Arun Viswanathan – RBC Capital Markets
David Begleiter – Deutsche Bank
Punjabi Ghansham – Baird
Hassan Ahmed – Global Image
Jeff Zekauskas-JP Morgan
John Roberts – Credit Suisse
Josh Spector – UBS
Kevin McCarthy – Vertical Research Partners
Kiesean Riddick – Evercore ISI
Matthew DeYoe – Bank of America
Matthew Blair – TPH
Mike Leithead – Barclays
Michael Sison – Wells Fargo
PJ Juvekar – Citi
Operator
Greetings and welcome to Celanese’s call and webcast on Celanese’s 2022 quarter results. [Operator Instructions] As a reminder, this convention is being recorded lately.
I would now like to turn to Brandon Ayache, Vice President of Investor Relations. Thank you. You can get started.
Brandon Ayache
Thanks, Darrel. Welcome to celanese Corporation’s 2022 quarter earnings convention call. My name is Brandon Ayache, vice president of investor relations. With me are Lori Ryerkerk, chairman of the board and chief executive officer; and Scott Richardson, Chief Financial Officer.
Celanese Corporation distributed its quarterly effects through Business Wire and posted ready-made comments about the quarter on our online investor relations page in the afternoon.
As a reminder, we’ll talk about non-GAAP monetary measures. Definitions of those measures, as well as reconciliations with comparable GAAP measures, can be found on our website.
Today’s presentation will also include forward-looking emails. See the warning related to prospective emails at the end of the press release and comments ready. The Form 8-K reports containing all of those documents were also submitted to the SEC. . Because we posted our ready comments yesterday, we will now open; now pass the call to Lori for some introductory comments.
Lorry Ryerkerk
Thank you, Brandon, and thank you to everyone who has joined us today. Given the macro uncertainty of the world right now, I sought to take a few minutes to set the tone for this call and re-highlight the priorities we have as a company. While preparing the earnings reports we published yesterday, I tried to highlight 2 long-standing qualities of Celanese and its employees, and I need to highlight them again today. First of all, we are completely committed to our goals, we in executing the things we can control.
At those points, we are committed to running our business style to maximize profits and money generation. We are committed to integrating and creating synergies temporarily with our acquisitions of Santoprene and M.
Clearly, recent macroeconomic dynamics have done little to us. This is not new. We do not and will not use them as excuses. In recent years, our groups have performed exceptionally, even record-breakingly, while dealing with the global pandemic, severe limitations on uncooked fabrics and global logistics, record degrees of charge inflation and now rise to this list an immediate rise in interest rates. We know how to respond to demanding external situations by executing against what we can control.
Our engineering materials and acetyl chain groups posted record gains in the first part of 2022. Its consistent national excellence and business agility generated record adjusted earnings consistent with constant percentage functionality in the first part of 2022 and very smart customers throughout the year. even without the advantages of getting consistent buybacks with percentages this year. Our finance team was able to secure continued financing for the acquisition of M
We cannot expect what the world will provide us in the future. Right now, we see very few first-hand indications in our order eBook that justify the severity of the market headlines we all read and the market reaction we’ve had. experienced. But I don’t need to spend our time on this call today speculating about things our team can’t control, whether it’s trading functionality outside celanese’s doors or certain macro ex situations in the future. And while we don’t expect the worst, I need to be transparent that we will be located and ready for it.
We look forward to complete the acquisition of M
With that, I’d like to ask Darrel to move and open the Q&A session.
Q&A session
Operator
[Operator Instructions] The first came from Vincent Andrews’ lineage with Morgan Stanley.
Vincent Andres
Lori, just reading the ready comments, possibly would have misunderstood it, but it doesn’t look like she’s assuming an EBITDA lower than the plan for M
Lorry Ryerkerk
Yes. Thank you for the question, Vincent. Listen, our genuine purpose has been to focus on the money and the steps we can take to offset the approximately $250 million in additional pre-tax interest we expect. I have to say that I am really pleased that our team has achieved this investment in a very complicated environment to do so. Therefore, we are very satisfied with where we are in terms of investment.
But we look at how to offset that from a monetary basis. So we look at capital, we look at ordinary capital. We are looking for another bureaucracy to generate liquidity. Obviously, our more productive functionality within Celanese this year and our confidence that it will continue next year will also help offset that in a money function.
If we take a look at the performance of M
I must say, personally, that I’m more interested in what they’re doing in the moment part and the momentum they can create as we move into the moment part and into the acquisition moment. And obviously, we are very specific when we look at synergies and early capture of synergies and look at steps similar to what we did with Santoprene, what steps we can take immediately after the completion of the acquisition to try to increase your profits to the point we expected at that point in the transaction.
Vincent Andres
And just as a follow-up, could you tell us a little bit about the difference in the value of acetic acid between Asia and the United States?What were your expectations about how this hole will play out?
A-Lori Ryerkerk
Oui. Je think about what we saw in the use of the room at the moment, although physically it was quite powerful in Asia, we saw some fall calls due to COVID. All the manufacturers were working pretty well. So we saw a slowdown in demand as we went along or, sorry, a slowdown in costs in the current quarter.
Looking at the third quarter, we expect it to probably stay at that kind of $450 per ton that we still see for Chinese acid. I think the story in the Western Hemisphere is a little different. Demand has remained quite strong, especially over the Western Hemisphere. And we’ve had production outages in the Western Hemisphere that continue through the third quarter. So I think that’s where you see the difference in value.
And what’s a little different is that, with the logistical issues in the world today and the availability of ships, I think it’s been a little more complicated for other people to move, some of our competitors, I would say, are moving to Asia. , outside of Asia and in other parts of the world, which has kept this hole high. And I expect that hole to continue as we enter the third quarter.
Operator
The next one comes from Mike Leithead’s line with Barclays.
Mike Leithead
First of all, Lori, I hope you can elaborate, in the ready comments, you talked about a strategic review of the Company Acetate Tow. How do you think you’re rethinking your trading technique there?
Lorry Ryerkerk
Of course. If we take a look at our functionality in Acetate Tow, I mean, while we traditionally focus on offering our consumers unprecedented quality and security of supply, accompanied by longer-term contracts, we have obviously noticed in this era of immediate escalation of commodity costs and the immediate escalation of energy costs, that this approach of employing constant contracts is unsustainable. I mean, aggregate demand is still pretty physically powerful in the industry, but obviously we can’t and possibly wouldn’t continue to run a business that’s wasting money.
Therefore, we would like to incorporate more features into this activity. We want to become more agile. We want to move towards more dynamic pricing. And just as we’ve done in years over the years with VAM and emulsions and RDP, we want to review what our advertising contracts are, how we source, how we manufacture, all logistics is everything, how we produce or supply ourselves with greater optionality compared to what we have today.
In fact, we are convinced that there is a price in doing so. As we said, we did this with some of the downstream acetic acid derivatives. much higher price in the coming years.
Mike Leithead
And then secondly, just to Scott. Je I just need to explain some of the comments on interest rates that he made in the ready comments. So if I read it correctly, I think it’s adjusting the M interests.
Scott Richardson
So let’s adjust before we close this EPS release, Mike, so you’re right about that. But we included it because we didn’t adjust the flow of loose currencies. It is included as a portability charge. And this portability charge is still very similar to what we originally included in the agreement. Although interest prices have increased, the ability to reinvest these currencies before closing, we are now in a higher retreat than expected in the past.
Therefore, the net interest on the use is approximately the same as we had planned for the agreement. So overall, interest charges, based on existing investment on an annualized basis in the future, after closing, we would expect to be at that $250 million consistent with the range of years. And we’re still looking for tactics to decrease that, and we have plans that we plan to put in place in the coming quarters.
Operator
Our questions come from Jeff Zekauskas’ line with JP Morgan.
jeff zekauskas
In your debt financing, do you have the ability to seamlessly refinance the other parts of the debt if interest rates fall?Or is it more limited?
Scott Richardson
So, Jeff, what we’ve done with this funding is that we’ve tried to weigh a lot of that funding at the short end of the constant debt curve. So we have a larger amount in years 2 and 3, which will allow us to not only refinance, but also reduce leverage and pay that with the flow of money in the early parts of the deal.
We also have variable term loans of around $1. 5 billion, which will allow us to refinance that sooner. We are also on other cross-currency features in the future. years, we have the option to make currency swaps as we did a few weeks ago to get more opportunities in euros and yen. Opportunities for more productive exposure to benefits.
jeff zekauskas
My question at the moment. When we talk about the acetyl chain in 2023, if we go through a pronounced economic recession again, it seems that we are in another position because oil costs are much higher, we stay where we are or they are transmitted a little bit. When talking about the profit point or gain strength of the acetyl chain in a 2023 recession, where would we be or in what range?
Lorry Ryerkerk
Oui. Je I think the question you’re really asking, Jeff, is where do we see a fundamental source of income level?And while we may be in a recessionary environment next year, I think, personally, I think it will be shallower and has an effect on our business, even though we’re not immune to it, we think, at this stage, it’s manageable.
So I think if you look at the first part of this year and you look at the last 12 months, we’ve reached a point of $2 billion a year for the acetyl chain. And clearly, this is not fundamental. Obviously, we have experienced exceptional situations in recent years. Therefore, we expect moderation. If it goes back about a year, we were looking for about $1 billion a year before the Clear Lake expansion was raised as a fundamental income.
And we have continued our business for the past few years. We have incorporated many other options. We added the capacity of Elotex and RDP. We continued our business agility at Acetyl Chain, and saw a shift in the global balance between source and demand. let’s say, back to the most typical levels. But we are still in a type of use of 85% to 90% in China.
So, in general, we have a lot of confidence. We have increased our core revenue above that $1 billion point consistently year-over-year. Obviously, as I said, in China we are seeing the moderation of acetic acid. I hope that at some point we’ll start to see some of that in the Western Hemisphere as well, very – some moderation, for example, in paintings and coatings, but still physically powerful for the historical.
So I don’t have a precise number right now. What I’m telling you is that we’re proceeding to take a look at that and we’d like to see how the third quarter plays out. And as we do regularly, we will. publish indications for 2023 the October period.
Operator
Our questions come from Josh Spector’s line with UBS.
Josh Spector
I’m curious to know if you can talk about some of the end market volumes you see in EM, just like you went from the last quarter of the moment to the third quarter. So as an automotive, customer durable goods, where do you see the ultimate weakness and to what extent is that weakness pronounced in this market relative to its performance?
Lorry Ryerkerk
Yes. I think if we take a look at EM we see a slight sweetness, I would say, in all regions. I mean, in Asia with the COVID lockdowns we saw a bit of smoothness there, strangely, the car continued to be literally strong for us in Asia even though the market was low, I think Array of 13% in China in terms of builds, we were really up to 8%.
I would say in Asia, we want a little more visibility after the COVID recovery here now to assess the basic call that’s going to exist for some of the other areas. I would say in the US, we’re seeing customer spending. they remain high, which helps to keep the most productive of all regions, which in fact supports car production but also trade demand and some of the electronic and electrical products.
And then in the EU, I would say that we’re seeing symptoms that inflation and energy uncertainty are starting to have an effect on demand, although the signs are quite weak right now. If you look at the other end markets, in the automotive industry, what I would say is that right now it’s pretty hard for us to believe a situation where demand is what will drive the car. In fact, we believe that the availability of raw materials, especially chips, will continue to decline. And our forecast is that chip availability will improve slightly each quarter and will continue to do so through the end of 2023. And we think that’s what’s good, we think the demand is pretty solid. segments of the world, large arrears, low stocks.
So, we think the automotive industry is driven by chip availability, and that’s true across industries. I think what you have to think about the car is that today’s new cars use a lot more chips, especially electric vehicles. And so, while more and more chips are needed, as they are prioritized for more high-end cars and electric vehicles, this will likely still translate into fewer automatic builds than could historically have been noticed from there.
I think the genuine sweetness we’ve noticed has more to do with customers’ appliances and electronics, which maybe isn’t unexpected, as it turns out they all bought a new computer and phone during COVID, and I think there’s no backlash out there. I would characterize it as a modest sweetness, only a small percentage. It may also have an effect on inflation.
Medical, I would say that, in fact, our medical business in general has returned to pre-COVID grades in terms of income source point. And that’s even without the implants returning to their pre-COVID grades. So we’re seeing a much more potent call in the medical picture for other elements of our medical portfolio, like extended dose delivery devices and that sort of thing. And then he asked about EM, but I would only say that on the acetyl side, the softness we see is more in paints, coatings, and construction. But I would say this is far from the best of all time compared to what would be a typical benchmark.
Josh Spector
And just in terms of emerging market revenue, I think some of your competitors have talked a little bit more about the effect of the currency and how it has replaced their outlook. Has anything changed in your attitude about your plans?base? Obviously, the rates are worse, but I’m not sure what was incorporated into his council.
Lorry Ryerkerk
Oui. Je means, in fact, we see the effect of replacing in machined materials. If you look, say, this quarter of this year compared to last year, it’s about $10 million for MS alone. So we actually see it. It was a little higher this quarter than we had originally planned, but I think only a few million for MS.
And look, I think that’s really where you see the strength of our pipeline style in engineering fabrics, as well as the business agility of our EM employees. I mean, they’ve been there to manage the product line, manage pricing, do all those things to really cover the load of raw fabrics and cover the ForEx headwinds that we’ve noticed this quarter and all the quarters before it and every quarter ahead. And I think that’s where you really see the strength of Celanese and the other people of Celanese.
Operator
Our questions come from Ghansham Panjabi’s lineage with Baird.
Ghansham Punjabi
I guess for my first question, in your comments, Lori, in your ready comments about stock securities that have normalized in many end markets, verticals along the origin chain, does that, by definition, create fewer opportunities for the AC segment in terms of some kind of downstream and maximizing molecular profitability?Or not?
Lorry Ryerkerk
Yes, I would characterize it, Ghansham: I think our approach to the acetyl chain has done a great job of flexing the chain for, say, 2 years to address the difference between the Western Hemisphere economy relative to China and moving as much as you can imagine in the chain.
What I would say is that as we see low costs in China, it was seen in the last quarter, we moved a lot of curtains from Asia to Europe and we also did it in the first quarter. We will continue to do so. What I would say is that we’re probably reaching our limits in terms of the flexibility we have in changes, because we’re complete in downstream derivatives. We operate at full capacity in VAM, VAE, RDP. Therefore, we will continue to take advertising measures to verify and take advantage of the other opportunities we see in the market. But I think we’ve overcome the barriers of optionality that we have within the AC channel, if you, especially if you’re hunting right now quarter.
Ghansham Punjabi
And then, in the recession-type scenario, how do you see volumes betting on your emerging market segment in the context of the fact that many end markets, such as automotive, which are large, have fully recovered?And would you expect the same for METRO?
Lorry Ryerkerk
My vision of the vehicle, and I just talked a little bit, my vision of the vehicle is that we probably have 3 years of pent-up demand on the vehicle. I mean, if you order a vehicle in Europe, you wait a year. to get it. If you order one in Japan, you wait 1 to 2 years. Even in the United States, I mean, you can wait a long time if you’re looking for something specific. So I think there’s a lot of suppressed call in the vehicle.
And especially for high-finish vehicles, in which we have a more powerful presence and electric vehicles, in which we have a more powerful presence. now and we have this big demand suppressed, I think the car will not be affected relatively. Again, I don’t see anything until the end of 2023 that will have an effect on automotive demand aside from shortages of chips and other raw materials, but basically chips.
I think we’ll continue to see sweetness if we enter a more recessive environment for customer durable goods, things that other people might differ from buying, electronics for the customer. People will wait to buy their next iPhone. But the medical and pharmaceutical industry are very resilient market. I don’t expect to see an effect there. And we don’t see any effect on the industry and some of the electronics in 5G and things like that. And I actually hope that those advances for 5G and that kind of thing will continue.
For power generation, I mean, with the way the world is evolving, more electric vehicles, more infrastructure, more Internet of Things, I don’t really see who is affected. So the real impact that I expect is what they’re starting to see diminish, which is durable goods for customers and electronics for customers, which for us are a pretty small component of our portfolio.
Again, I don’t have any M
Operator
Our questions come from Michael Sison’s line with Wells Fargo.
michel sisón
Charming neighborhood and perspectives. Lori, I guess with the extra funding, and I know you’re doing a very smart job of making up for a lot of the negatives, I think you expect the deal to make a few dollars in the first year. – I mean, it sounds hard to do, but is it going to be positive?And are there things you can do to compensate for the dilution of the EPS of the deal, or the funding?
Lorry Ryerkerk
Yes, Mike, I would just say it’s too early to give you a definitive answer about it. I mean, we’re actually, we think, as I said, right now we’ve focused on the monetary aspect of this equation, actually maximizing the flow of money. We see that we have significant opportunities also in the duration and timing of our synergies. We believe that, as we did with Santoprene, we will be able to move things forward and build the imaginable amount of synergies in the first year.
Like I said on the money side, working capital, capital expenditures. In addition, the functionality of our companies, we want to have a greater vision of 2023, in which we are operating lately. So, I would say that from the point of view of accumulation, it is too early to call. But again, I hope we have a revised update that we can share with all of you within the October deadline.
michel sisón
And then it sounds: he noticed in the ready comments that the sadness with the M’s
Lorry Ryerkerk
That’s a tough question to answer, Mike. Listen, at Celanese, we expect our company to be a world-class operator. We expect it to be commercially agile. We sell our products in highly differentiated and specific finishing applications. Therefore, at Celanese we work very hard to maintain profitability despite external disruptions and periods of volatility.
As we say, I never heard anyone at Celanese use the excuse of underperformance by saying that the market is cyclical or that we have had too many headwinds. I think that’s how we work in Celanese. Now we know that there are a lot of other wonderful people who come from M
Operator
The next came from P. J. Juvekar’s lineage with Citi.
PJ Juvekar
A quick consultation on your exposure to herbal fuel in Europe. He gave some important points about Germany and its Trash-2-Cash deal. plant and get that — provide consumers in Europe or Asia?
Lorry Ryerkerk
Look, as we said in our notes, our exposure to herbal fuel in Europe is concentrated in Frankfurt, Germany. And I would say that 30% of our global sales come from Germany in 2021 and that’s pretty typical normally. And thanks to Trash-2-Cash, we also have projects that allow us to use fuel oil in IPH. I don’t think so. It is highly unlikely that we will want or wish to close IPH in the winter.
Obviously, for acetyls, we have the option to bring fabrics from Asia or Europe, but we don’t produce many there. It’s just that palm production is the most important thing we do, as well as other things at IPH. I think it’s very likely that we want it. We can operate at reduced rates, I think, it’s the most likely.
And here again, it’s the big customer of energy. Many other things we produce there don’t use the same amount of energy. So, and I think there are other places in Europe outside of Germany that could be more affected, we’re racing to take a look at the factories to mitigate all of our critical issues. sites in Europe.
Scott Richardson
Sí. La flexibility of capacity is all we do every day, P. J. We’ve talked about it a lot in the acetyl sector, but we also talk about it in engineering materials. So if there are opportunities where we have overcapacity to a downsizing in other regions, we can move that if the logistics are there, as Lori mentioned, and we’ll look to maximize profitability if that opportunity exists.
PJ Juvekar
Super. Et and then in the car, many chemical corporations and others saw that there was a quick step back. But as he said, there are limitations on the appearance of fleas and all that. So what is the ultimate realistic perspective?
Lorry Ryerkerk
Well, listen, you might not forget that when we were handed this year, really, IHS has a pretty positive number, I don’t remember what it was, 8% or possibly even more than that. , from the expansion of the structure from 21 to 22, we really based our forecast of the 22nd on solid automatic constructions from the 21st to the 22nd. And I think if you look at where we are, I think we’re just below 2% lately. expansion according to IHS for global car manufacturing.
And they still tout it at 4%, we still think the dish was a pretty smart prediction. And again, because we’ve actually relied on chip recovery and the fact that cars are employing more chips now, so you want more chip recovery to fill the same number of cars. So, we still think flat compared to 21 is a pretty smart estimate.
The attractive thing is that here in North America, you’d think that with energy prices, we’d start to see the transition to greater demand for more fuel-efficient cars. But, in fact, it is not so. We still see many trucks and SUVs as the main models under construction. And again, they tend to be taller, more exclusive cars and require a lot of tokens.
Operator
Our questions come from Kevin McCarthy’s line with Vertical Research Partners.
Kevin McCarthy
Scott, I wonder if you can share with us your final take on the capital budget. In the last quarter, I think it indicated $550 million, but reading the ready-made reviews last night, it turns out that you’re actively comparing features to reduce that number. And do you have any initial ideas about how that number might evolve to 23 as you complete your expansion in Clear Lake?
Scott Richardson
Oui. Je I think this $550 million diversity for this year is still where we’ll be. As we look forward to next year, I mean, we, in our original model with the company combined with M
So we’re going to offer a little more color on where we think it will be done on a combined basis as we enter in October. But it will likely be one of the vital elements to offset the additional $250 million interest mentioned in the prepared remarks. Therefore, I believe that we may not be able to compensate everything with capital compared to our original plan, however, we will be able to get a lot of capital.
Kevin McCarthy
It is ok. And then, Lori. . .
Lorry Ryerkerk
If I can upload something to that, I mean, because you asked where it came from. I believe that, as we have noticed this year, given the large number of assets we get from DuPont, we will assess where we believe you can get more capacity more successfully from DuPont assets compared to new construction. So, let’s compare that, and we think there are opportunities for synergy there.
And then I think that as they’ve noticed that we do COVID, with higher curtain costs right now for metal and everything else, although we’re starting to see it go by, looking to have a clearer view of demand in 2023, we think there’s going to be an opportunity to stop some of the bigger capital projects and use that time, as we did with Clear Lake, to achieve efficiencies and savings in terms of structure costs and how we participate in contracts for the structure of those facilities. .
So I would say it’s nothing dramatic. We don’t cut to the bone. We still think that using capital for biological expansion is a very smart use of cash. But let’s be careful about how we invest in light of the uncertainty surrounding the economy for next year.
Kevin McCarthy
It is ok. And then Lori, reading your reviews, seems pretty comfortable with order books like you see them here in July anyway. But in a situation where the macro environment has continued to move, so to speak, what do you think of the composition of the portfolio?In other words, do you see levers you can use in terms of secondary assets that can be useful in speeding up the deleveraging process, if necessary?
Lorry Ryerkerk
Listen, this is anything we see all the time. We are reviewing our portfolio. And as you’ve seen, we’ve taken a number of steps in recent years, whether it’s an opportunistic movement like the CPP divestment we’ve made or some of the smaller divestments we’ve made around PPE and other compounds. . So what I would say is that, first, we have enough financial capacity on our balance sheet today to fund the deal with money and committed debt. Therefore, we don’t want to sell anything in the short term.
And, having said that, we will be opportunists. We, interestingly, have actually gained a moderate amount of incoming calls related to some of our assets compared to what we have sometimes noticed in recent years. So, the inventory market has slowed down, we’re getting a lot of calls. that gave us the opportunity to take a look at a variety of our assets and literally see if there’s an opportunistic ability to monetize any of them, similar to what we did for Polyplastics. So, it’s something we’re looking for, but not something I want to do.
Operator
Our questions come from John Roberts’ line with Credit Suisse.
jean roberts
You discussed the functionality of Santoprene the quarter. How did POM do it?You have a key competitor who is orphaned right now. I think it’s a smart enough environment for you to earn a percentage in POM.
Lorry Ryerkerk
Look, I would say at POM, I think POM works like we did during the year, we expected it to work. It continues to be used in many high-value finishing applications. And I wouldn’t say we see a genuine difference in calling or margins in POM now to what we expected.
jean roberts
And then, how did Ibn Sina behave in the neighborhood?I think it’s a very smart environment for them.
Lorry Ryerkerk
So obviously, with the increase in methanol costs in the last quarter, we saw this materialize in Ibn Sina. I think we said that in our comments. We had a clever dressing from Ibn Sina but largely compensated, anything still around $5 million, offset through the restructuring of KEPCO. And so it is well done. Again, don’t forget that Ibn Sina has a delay of one quarter, so we continue to see Ibn Sina’s attendance as we enter the third quarter.
Operator
Our questions come from Hassan Ahmed’s line with Alembic Global.
hassan ahmed
A query on the trajectory of volumes within the acetyl chain. I look at the sequential accumulation in volumes from Q4 to Q1, and it was 8%, I don’t forget correctly, there were some changes in Q1. And then take a look at the sequential type of descent. In the current quarter, it was down 3%. So I’m just looking to get a broader concept of this trajectory from fourth quarter to first quarter to second quarter, clearly keeping in mind the scenario in Europe, which evidently also prevails in the first quarter.
Lorry Ryerkerk
Look, Q1 to Q2 is pretty simple. I mean, we did, even though we had some small stops in the first quarter at Clear Lake, we had bigger effects in the current quarter, which we then had to claim force majeure because of the uncooked curtains, blackouts at some of our raw curtain suppliers for Clair Lake. Therefore, this difference in volume, you will see that Q1 to Q2 is due to this force majeure situation in Clear Lake.
hassan ahmed
And now, only in the strategic redesign he talked about within Acetate Tow. I mean, would a possible sale be considered? Obviously, I have memories of you running this component earlier, however, evidently also at another time. But would it be something I would think about as well?And perhaps some of those incoming calls are also similar to AT activity?
Lorry Ryerkerk
Look, what I would say is that when we’ve already talked about this in those calls, we would actually make a sale, but we think we would find the same anti-competitive disorders in Europe that we had in the past in the deal. has been edited. So I would say that we’re actually focusing at this point on the movements that we can take that are under our own control to improve the functionality of this company.
Scott Richardson
Oui. Et Hassan, just to go up to that, is that a lot of prices were created by leveraging Acetyl Chain as a built-in price chain and making sure that in downstream derivatives, the full price of upstream is captured and contained in the way we compare products. Therefore, we believe that a much more general commercial price will be created by operating that business in a more built-in way in the future.
Operator
Our questions come from David Begleiter’s lineage with Deutsche Bank.
david begleiter
Lori and Scott, to M
Lorry Ryerkerk
Yes. Several things. First, I’ll have to say that I’ve met a smart number of other people within the M organization.
And I think with any big merger and acquisition, you have to worry about cultural integration. And I would say that what we see is that for other people who paint in M
I would also say that, as we continue to delve into synergies, and Scott may need to check in to make more feedback, however, as we delve into synergies, the synergies we request are real. They’re here. We think we’ll probably get more, and we think we’ll probably get faster. So we’re following all those steps now.
And so, we think there’s even more price. we, again, are very positive about the price that can be generated with those molecules and the style of channeling that we have used so well here at Celanese.
Scott Richardson
Right at this point of synergy, I think we had first planned $150 million in the first year and $150 million in the current year to achieve synergies. We will be able to spend less than that in the first year, in particular, and meet or exceed the initial synergy target of $75 million in that first year.
So there are a lot more synergies at a lower cost or free synergies right from the start when we design this, which we’re excited about. And then, another thing to go up is just the sales teams. I think what we learned is how we are. structured, how M
So, there are some things that we think will evolve our style. And we’ve been talking for 5, 6 years about the continuous evolution of our pipe style and we believe that the integration of M
david begleiter
And quickly, Acetate Tow, what has been the reaction of your customers to this new strategy or is it still too early to get a complete response?
Lorry Ryerkerk
Yes, I think it’s too early. I mean, we’re still running internally to expand our models and the accuracy with which they work. So we’re going to see more, I guess, in the part of the moment when we make adjustments to our customers.
Operator
Our questions come from Matthew DeYoe’s line with Bank of America.
Matthieu De Yoe
So overall, you’ve seen a pretty significant amount of acetyl cuts over the last 24 months, not just from Celanese, across the industry and with a frequency that we’re not used to seeing. So what’s the challenge here? I mean, is it like everybody’s appropriating their CO devices and it’s a challenge?How, why do they all keep going down?
Lorry Ryerkerk
It’s an attractive query and I have to see the knowledge because I’m not. If I look, thinking about my own memory, I would say that within Celanese, our acetyl sets probably work more reliably than in its history. So I deserve to see, take a look at the industry numbers to see if that’s literally accurate.
I don’t think there are unusual topics here. I mean, I think when COVID came out, we saw other people handling the services very hard because there was a sudden increase in demand. And I think response times are getting shorter. Step back and that kind of thing, and you see that other people have to take response times or push too hard and have unplanned downtime. But I, there is no other kind of formula failure in the formula that I see that I would argue that there is a problem. I think maybe it’s just a matter of time and maybe recently a bias in terms of thinking things are worse today than in the past.
Scott Richardson
However, the only thing that would go up, Matthew, I think it’s important, he talked about this on other calls, is that we’re starting to see some of the logistical challenges, we’re seeing more subsequent calls from the Western Hemisphere coming back online and the demand is higher. And yet, it is more complicated to bring products from Asia, especially China, to the Western Hemisphere.
And I think we’ve been talking for several years about the need for capacity in Asia to move toward the Western Hemisphere to maintain balance. And that has been questioned in this day and age. So, I think that without falling into the West, it made some of those disruptions more visual in the market than perhaps they had been historically.
Matthieu De Yoe
That’s a point, yes. And then how much profit did KEPCO, [switch] and Santoprene raise to EM in the current quarter?
Lorry Ryerkerk
So, compared to the current quarter last year, Santoprene, about $15 million compared to last year, when we didn’t have Santoprene.
Scott Richardson
And KEPCO was pretty mínimo. es irrelevant It’s not far from that amount of Santoprene, but it was pretty minimal.
Matthieu De Yoe
And then if I, is KEPCO a full room or is there a partial room there?
Scott Richardson
It’s a partial quarter because there are still shares that need to be sold through the joint venture, so it was a pretty small quarter.
Lorry Ryerkerk
But remember, it also came from stock earnings, so it’s a bit sharp in the overall bottle line.
Matthieu De Yoe
Of course. I’m just looking to have a transparent reading of MS volumes during the quarter.
Lorry Ryerkerk
Of course.
Operator
Our questions come from Matthew Blair’s line with TPH.
Matthieu Blair
With all the volatility of oil, herbal fuel and coal, have you replaced the curve with acetyls?And do you have a concept of exploitation rates across the region?
Lorry Ryerkerk
Yes, I don’t think the load curve has changed. I mean, the only position where I would say you see the kind of messy stuff, I mean, things have tended to evolve at parity, yet what’s out of control, of course, is herbal fuel in Europe. In terms of oil, if you take a look at herbal fuel charges today with the Nord Stream Reduction and everything, I mean, it’s probably the equivalent of $350 of oil.
Again, this is not a problem for us with acetyls, but rather for engineering materials. So, I would say that for acetyls, the load curve remains, even with the highest loads of herbal fuel in the U. S. In the U. S. , it remains a significant merit on the U. S. Gulf Coast. In the US, acetyl production, and then oil in Singapore and coal in China remain virtually the same. And here again, Europe is a bit upside down, but it’s not a big deal for us with acetyls.
Scott Richardson
Oui. Je I think it’s also vital to think about the landed cargo curve, because in the end that’s what matters. And because of this logistical dynamic that I talked about a few minutes ago, I mean, it’s actually delaying things because it’s very expensive to ship products right now, even though you can take ships out of China to Europe or the United States.
Matthieu Blair
And then, Lori, I think discussed the headwind of the coin of around $10 million in the current quarter. Do you have a figure for 2022 that is included in your forecasts?
Lorry Ryerkerk
So the $10 million was just for emerging markets. If you look at quarter after quarter, the coin was close to $25 million from the first quarter of 22 to the current quarter of 22 alone. So we have a figure built into the forecast for the full year. I’m not sure what’s in mind, but Scott, maybe you have it?
Scott Richardson
Oui. Je means, from a general point of view, a renewal of around $0. 01 per euro equates to about $7 million in profit per quarter. Therefore, it is abundant on an annualized basis. Engineering fabrics and acetyl clumps have done a phenomenal job of compensating for that. Therefore, it is abundant and has had a fairly large effect on us throughout the year. In fact, we have incorporated euro rates very similar to those we see today. in our forecasts for the moment half.
Operator
Our questions come from the lineage of Arun Viswanathan of RBC Capital Markets.
Arun Viswanathan
I guess first of all, he read some attractive comments in his prepared comments about herbal fuel in Europe, and he talked a little bit about it as well as being a bit messy. But I guess, given some of those steps, he’s taken, it turns out that he expects that point of value to remain structurally higher for the foreseeable future. Is that the case? And I guess, if that’s the case, how do we think about emerging markets and how will they have an effect on higher prices in the coming years?
Lorry Ryerkerk
Look, I think the energy overload put into position through the organization of engineering materials has been very effective in helping us maintain our margins. a primary has an effect on volume due to the higher price.
Now that we are moving forward and if we stay at that kind of $60 per million Btu that we see today as we enter the winter period, I think we will see energy values, not necessarily the impact on our materials, but only energy prices for goods manufacturers in Europe have a negative effect on power, either the price or even the availability at a certain time. And I think it’s more likely that value in its own comforts will result in more demands for destruction for emerging markets than necessarily passing the burden of power we put into our product.
Arun Viswanathan
And then, as a follow-up, in the same way, he noticed that there’s relief in CapEx here and potentially even greater in 23. Could you describe that a little more? And I guess he claimed to be successful at 3x leverage in a few years. I wonder if it has bigger levers to reduce capEx even further to stay on track with this deleveraging or if it doesn’t actually have that.
Lorry Ryerkerk
Yes. Listen, we can reduce our CapEx in part if we needed them. We have already done so. We did it when COVID. No came we’re going to go so far that we can’t and our amenities work safely and reliably.
Nor do I believe that it is obligatory to do so in order to achieve the monetary objectives that we have set around this agreement. But we still have those levers to delay or cancel projects. But then again, we’re looking for what the long-term aptitude of this company is, and there are many, in engineering materials, there are many expansions that we need to make and polymers that don’t come from DuPont, just our base polymers. As in acetyls, we need to continue our expansions in electric bikes and VAMs. Of course, we will complete the Clear Lake project.
So, there are more levers if we wanted them, if we introduced a primary recession, of which we don’t see today’s symptoms and significant destruction of demand. Obviously, there are more levers that we can pull. But the kind of securities we’re talking about now, $50 million this year, it would possibly be $50 million to $100 million next year, those types of securities are things that we think it makes sense to do just in view of the deal and opportunity that we would possibly have to produce more successfully from DuPont’s assets and considering the high costs that exist for entrepreneurs, for metal and all that stuff, just a little delay in a little bit.
Scott Richardson
Just to give it a little more color, Arun. We had accumulated $800 million in combined capital in 2023 for our core plus M
Brandon Ayache
Darrel, make the next one the last, please.
Operator
Our questions come from Steve Richardson’s line with Evercore ISI.
Kiesean Riddick
So I’m looking at Engineering Materials, it’s undergone a pretty impressive transformation. So, I wonder if you can say a little more about what motivated your MS results, especially in China in terms of exposure to electric vehicles. And where do you see this going down at the end of the year?
Lorry Ryerkerk
As I said before, we saw very strong demand in China despite a slowdown, a significant slowdown in car production due to COVID-related issues. I think there are several things; First of all, it’s our wonderful other people in China who are there. We also have a trend, and we literally continue to push, business models and new volumes, which come from the allocation pipeline.
It’s also the fact that we have a tendency to use high-end cars, which tend to take precedence over other cars. And then, certainly, electric vehicles in China, where we are very present. Electric cars remain the priority of automakers, and we continue to see a lot of hardware entering the electric vehicle market, especially for GUR in lithium-ion battery splitter films.
Operator
That’s all the time we have for questions today. I would now like to call Brandon Ayache again for any final comments.
Brandon Ayache
We would like to thank everyone for listening today. As always, we are available after the call for any follow-up questions. Darrel, please go ahead and end the call.
Operator
This concludes today’s conference call. We appreciate your participation. You can disconnect your lines at this time. Have an end to the day.