Just one week into the job, Celanese Corp. (IW 500/153) CEO Mark Rohr was already forging ahead on the company's plans to double its earnings to $9 a share by 2016.
Rohr took the helm at Dallas-based Celanese, one of the world's largest producers of acetyl products, April 2. He replaced former Chairman and CEO David Weidman who retired after 12 years with the company, including the last eight as CEO.
Employee empowerment will be one of several key components helping the company meet its growth goals, Rohr says. It's a strategy Rohr says worked well for him in his previous role as CEO of specialty chemical producer Albemarle Corp. (IW500/289). At Celanese, Rohr says he plans to have employees more involved in customer-collaboration activities that bring new solutions to market.
This includes the ability to take technology used in a customer's application and modify it for use in another component. The company could then produce a prototype of the solution -- molded to specification -- and present it to the customer as a new product, Rohr says.
"In other words, we're finding ways to go beyond just talking to the customer and actually going in and bringing solutions to them," he tells IndustryWeek.
The ability to bring new technologies to market along with geographic expansion helped Celanese achieve record earnings in 2011. The company's net income reached $607 million, or $3.82 a share, in 2011, up from $377 million in 2010.
But Rohr acknowledged in Celanese's first-quarter earnings call with investors on April 24 there are challenges ahead the company must address. Celanese's first-quarter performance fell below analysts' expectations. The company's earnings reached $183 million, or $1.15 a share, in the first quarter, up from $142 million, or 90 cents per share, in the year-earlier period.
Excluding tax credits and other adjustments, Celanese earned 72 cents per share during the quarter, missing the Zacks Consensus Estimate of 77 cents per share.
Innovation is the 'Differentiator'
The company attributed the lower-than-expected results to soft demand in Europe and China for its acetyl products, which are used in coatings, paints and adhesives. In addition, high raw materials prices have cut into margins. Celanese responded by idling a 600,000-ton facility in Singapore, Rohr said during the April earnings call.
Despite the challenges, the company is moving forward with new technologies that Celanese executives see as major growth drivers in the coming years. One of the company's more promising innovations converts hydrocarbon feedstocks, such as coal and natural gas, into ethanol.
Celanese introduced the technology, called TCX, in November 2010. TCX is based on the company's existing acetyl chemistry technology, says Steven Sterin, the company's CFO. It's a product development story that's more than 30 years in the making.
Acetic acid, part of the acetyl intermediates group, is a basic building block for acids and paints. About 30 years ago, Monsanto Co. (IW 500/94) licensed its acetic acid technology to Celanese and BP PLC (IW 1000/3).
Over time, Celanese dramatically grew its acetyl production capabilities and decided to find other uses for the product, says Sterin, who also leads the company's ethanol business efforts as president of Advanced Fuel Technologies.
Through its research, the company formulated a way to gasify hydrocarbons and convert them into transportation liquids. Celanese claims the technology is less expensive than traditional corn or sugar-based ethanol.
Oil price trends and the growth of shale gas were two major factors driving the push toward developing the ethanol solution, Sterin says.
Celanese has increased its research and development spending by 20% to 25% over the past few years, Sterin says. But it's not all related to ethanol technologies.
The company is continually searching for new innovations that will give it an edge over competitors.
"I think in our space what's going to differentiate companies in the future isn't going to be going to Asia," says Sterin, adding that 40% of Celanese's revenues come from Asia . "It's not location. It's going to be differentiated technology -- both in terms of cost as well as product offering. "
The company plans to open a TCX technology development facility at its Clear Lake, Texas, complex this summer. The building will be a modular-design unit where engineers will work to convert natural gas to ethanol.
A larger project is underway in China where Celanese plans to modify an existing integrated acetyl facility in Nanjing to produce ethanol from coal. The company received a key regulatory approval from the Chinese government on March 22 to proceed with the project.
Celanese expects to begin production at the site in 2013. Continued technological advancements to its TCX process will allow the company to produce 30% to 40% more ethanol than the originally planned amount of 200,000 tons, Sterin says.
In the United States the shale-gas boom could present significant growth opportunities for Celanese's TCX technology. But regulatory roadblocks have put the brakes on further expansion.
Ethanol legislation enacted prior to the availability of TCX requires most of the ethanol produced to be derived from corn. One of Rohr's priorities as CEO is communicating with lawmakers and other key stakeholders that opening the market to more ethanol sources is another step toward energy security.
"What we're doing is trying to educate members of Congress and their staffs, and in our discussions there's been tremendous receptivity to finding a way to open up the U.S. fuel pool to other sources of ethanol and alcohols in general," Rohr says. "What's yet to be determined is what's the path to make that happen - whether the Renewable Fuel Standard itself is modified or if there's a stronger fix to that challenge."
In January, six House members introduced a bill sponsored by Republican Pete Olson from Texas that would encourage more ethanol production from sources other than corn. But Rohr says he doesn't expect to see any measures passed until after the presidential election.