Celanese Corporation (CE – Free Report) and Mitsubishi Gas Chemical Company (“MGC”) recently signed a memorandum of understanding (MOU) to restructure Korea Engineering Plastics Co. (“KEP”). It is a joint venture owned 50% by Celanese, 40% by MGC and 10% by Mitsubishi Corporation. KEP was formed in 1987 to manufacture and market polyoxymethylene (“POM”) in Asia.
According to the MOU, KEP will be directed toward manufacturing, developing, producing, and supplying high-quality products to its shareholders. The shareholders will then market them globally, without restrictions. The restructured venture is expected to support global growth of the joint venture’s products.
Celanese and Mitsubishi Gas are focused toward increasing KEP’s production capacity to enhance the long-term security of supply to its consumers and further support growth. The rise in volumes is expected to reflect in a series of steps in the years to come.
The joint venture restructuring is expected to be completed before the end of 2021, subject to customary closing conditions and any necessary regulatory approvals.
Shares of Celanese have gained 5.9% in the past year compared with 9.2% rise of the industry.
Celanese’s global demand during the third quarter progressed toward recovery across most of its end markets. It expects the momentum witnessed in the third quarter to continue in the fourth quarter, which is expected to partly offset various headwinds including a major turnaround at its Frankfurt POM facility and normal seasonality in December. For 2020, the company expects adjusted earnings of around $7-$7.10 per share. It is focused on controllable actions to drive strong growth next year amid uncertainties, including production planning, productivity and disciplined capital deployment.
Celanese currently carries a Zacks Rank #3 (Hold).
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