Chuck Kyrish - Vice President, Investor Relations Mark Rohr - Chairman and Chief Executive Officer Chris Jensen - Senior Vice President and Chief Financial Officer.

Laurence Alexander - Jefferies Vincent Andrews - Morgan Stanley David Begleiter - Deutsche Bank Securities Frank Mitsch - Wells Fargo Securities LLC P.J.

Juvekar - Citigroup Bob Koort - Goldman Sachs Jeff Zekauskas - JPMorgan Hassan Ahmed - Alembic Global Jim Sheehan - SunTrust Robinson Humphrey Alexi Yefremov - Nomura Arun Viswanathan - RBC Capital Markets John Roberts - UBS Securities Nils Wallin - CLSA.

Good morning, and welcome to the Celanese First Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Chuck Kyrish. Please go ahead..

Thank you, Carrie. Welcome to the Celanese Corporation first quarter 2016 earnings conference call. My name is Chuck Kyrish, Vice President of Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer; and Chris Jensen, Senior Vice President and Chief Financial Officer.

The Celanese Corporation’s first quarter 2016 earnings release was distributed via Business Wire yesterday after market close. The slides for the call and our prepared comments for the quarter were also posted on our website, www.celanese.com, in the Investor Relations section.

As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements concerning, for example, Celanese Corporation’s future objectives and results. Please note the cautionary language contained in the posted slides.

Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included on our website in the Investor Relations section under Financial Information.

The earnings release, non-GAAP reconciliations, presentation and prepared comments have been submitted to the SEC in a current report on Form 8-K. This morning, we’ll begin with introductory comments from Mark Rohr, and then we’ll field your questions. I’d now like to turn the call over to Mark..

Thanks, Chuck, and good morning, everyone. Our prepared remarks were released with the earnings, so I’ll keep my comments brief and then open the line for your questions.

Today I'm very pleased to report first quarter adjusted earnings of $1.83 per share, representing growth of 6% versus the prior year and setting a new performance record for Celanese.

Adjusted EBIT for the quarter was our highest ever at $358 million, growth of 2% year-over-year and driven by record performance in Materials Solutions and resilient performance across the Acetyl Chain while facing a very difficult Chinese market.

Our adjusted EBIT margin was a record of 25.5% expanding 140 basis points year-over-year and a reflection of our broad-based productivity efforts and underlying business performance. This quarter our businesses continued their pace of consistent cash generation, achieving $217 million of free cash flow.

We deleveraged our balance sheet by $405 million in the quarter and still ended with $716 million of cash on hand. Looking ahead, I'd like to share earnings - our current thoughts on a quarterly trajectory of our earnings for the remainder of the year. In the second quarter, we see headwinds of roughly $0.30 to $0.35 and as versus the first quarter.

This is primarily due to our heavy turnaround period, which will include the first turnaround of our Engineered Materials plant in Frankfurt as well as several VAM facilities around the world. We also have an updated expectation for our affiliate earnings headwinds on an annual basis.

Due to further deterioration in netbacks on MTBE, we now expect IBN Sina affiliate earnings to be lower by $50 million in 2016. This is $20 million worse than we expected in January, or roughly $0.10 per share over the rest of the year.

When we roll it up for the year considering the economic backdrop and the strategies we have in place, we have line of sight to growth and adjusted earnings per share of about 8% to 10%.

As I’ve said earlier, to achieve the high-end of that range we will need some level of economic recovery in the second half to help us overcome a good bit of our fourth quarter seasonality. With that, I'll now turn it over to Chuck for Q&A..

Thanks Mark. As a reminder, we’d like everybody to limit your questions to one question and one follow-up. Carrie, let's please go ahead and get started..

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Laurence Alexander of Jefferies. Please go ahead..

Good morning..

Hi Laurence..

I guess two quick ones.

Can you give a little bit more detail on how your thinking has evolved on consumer fibers? And also can you give some detail on how much shares you bought in the quarter, and which you see as the cadence for the year?.

Yes. Well, I’ll do the first, and I’ll let Chris do the second, Laurence, if that’s okay.

What we've been communicating for a while on our fibers business has been really the story of de-stocking the world and primarily that in China, and I think all of the guys that followed the slides have a view that we've gone as an industry from being able to sell into China roughly 120,000 to 130,000 tonnes down to a level that’s roughly 25% of that today.

So the vast majority of that shrinkage in terms of sales in the China has in fact occurred. You saw some of that in our volumes this quarter. We took the first big hit on that reduction - the material hit in the first quarter of last year, so you see some of that year-over-year change as we go forward.

So our view is that, that business is kind of as advertised we think that the de-stocking outside of Europe is largely run its course, and there is even some signs of some small subtle volume increases outside of China. When you get into China, we think it's pretty stable as we go through the rest of this year with the current level we’re at.

We have expected over time of course that last for many bit, we'll work out the system as well. Net-net for the year, we've said, all along, we’re going to work hard to try to keep our earnings flat. We still are working to do that, and I don't have anything else to report on that front.

So, Chris, you want to update us on shares?.

Sure. So really good cash generation quarter for us and we’re in a great position now to go execute on that commitment to repurchase shares. As Mark mentioned, we have over $700 million, and more than half of that is now in the U.S. and that's a key to then going out to execute on the repurchases.

You'll also notice that following that revolver draw last year to do repurchases, that we paid that off in the first quarter. So that was our focus in terms of cash flows this quarter, so we will get after it and expect to probably do half of that $1 billion through the remainder of the year..

Thank you..

Thank you, Laurence..

Thank you. Carrie, let's please go to next question..

Our next question comes from Vincent Andrews of Morgan Stanley. Please go ahead..

Thanks, and good morning, everyone. Just a follow-up or two on the tow business.

It seemed to me that the volume was probably better than you were expecting in the quarter, so I just want to see whether that's true or not, or maybe you're going to say that it was better in the quarter, but it’s going to be different over the balance of the year, so the full-year expectation is the same.

But on the 9% negative pricing, I presume we should assume that for the balance of the year just given the contract nature of the business. And do you have any thoughts on pricing? It’s obviously early to head into next year, but do you think - you’re saying sort of the tow volume has flattened out.

So should that mean or should that imply that pricing is going to flatten out as well?.

Yes, thanks, Vincent. So if you look at that from a point of view, I think we expected the rebound in volume just because first quarter of last year we really took it on China [ph] as everything was shut down and we had going in the China, so first quarter of last year was an aberration in terms of its depth.

We have got our little bit of extra volume in this first quarter that probably will not repeat in the second and third quarter that just came to us as demands picked up outside of China.

So I think you should have a view that that swing from the low the first quarter to this quarter was kind of above to those little bit aberration, that’s going to settle out for an average little bit lower where we currently are as we go through the rest of this year. I think on price, you're absolutely right.

These prices are set really as we - kind of as we end the year, so the run rate on pricing, that delta year-over-year is going to kind of ride with us through the rest of the year. And net-net when we roll that up, including our productivity efforts and things we are doing to try to offset some of that, we are shooting out to be flat year-over-year.

If I look at pricing going forward, I think we really - China needs to sort itself out is what I would say with that, Vincent. China needs to have some stability to it and not continue to slide for us to start having a view that we could work pricing backup. So I don't know if it's going to be able to go up next year or maybe the year after that..

Thank you..

Thank you..

Okay. Carrie, let's go to the next question please..

All right. Our next question comes from David Begleiter of Deutsche Bank. Please go ahead..

Thank you. Good morning. Hey, Mark, back in November you discussed the M&A focus of the company.

Any progress on the M&A activity, especially in AEM?.

Yes, I wish I could share everything with you, David, but I can't. Yes, there is a lot of progress and we're working several deals that fit in that bolt-on category hard, and I hope that in the quarters ahead we’ll be able to announce those deals..

As I mentioned David, we paid off the revolver. We want that ready to go..

Very clear. And lastly, Mark, just on acetyls in China, you mentioned again a very difficult market there.

What changes that situation in the near or medium term?.

Well, it is a real pig’s breakfast over there, David. It's just tremendous overcapacity and the deflationary environment has pushed down acid margins to pretty pathetic levels. What we are seeing though is we are seeing people start to roll over. What I mean by that is they are stayed on enterprises in this arena have a higher massive layoff.

It's not a sustainable level. So my kind of view is that even with the overcapacity this year, we are going to see that start to drift up a bit as we get into this year. It is going to take industry rationalization for that to change. It’s going to take the new MTO plants to come on line for that to change. I think both of those things are needed.

With ethylene prices being what they are in China, there is pretty good opportunity for MTOs. So we are a little bit hopeful that that's going to move in and start driving methanol. But I wouldn't expect there to be an overnight change in the Chinese market..

Understood. Thank you very much..

Thanks David..

Great. Thanks. Carrie, let's go to the next question please..

Our next question comes from Frank Mitsch of Wells Fargo Securities. Please go ahead..

Good morning, gentlemen. This is normally the part where I talk about what a phenomenal quarter you had, but last year you guys upsided by $0.41 and this year only $0.34.

Why the slippage?.

I know, Frank, we are struggling..

Really good job. Hey, look, I want to quickly follow-up on the M&A question. Obviously in November, you did talk specifically about Nylon. And I believe in your prepared remarks, you also referenced doing some things in Nylon technology but it seems that you were doing that on your own.

Can you elaborate on what's going on and your interest in Nylon and what's going on there?.

Yes, we are very interested and obviously in autos, Nylon is a big play in autos. And the way this industry works, Frank, is when customers have challenges they invite in people that have portfolios or history in those markets.

So we've been working hard to get at the table when Nylon topics are discussed and that's been the advice of some of our friends in the industry, so our focus has been there. We've recently introduced some of our own technology and compounding this pretty novel and unique and so we’re now selling very small quantities but now selling Nylon.

A big portion of M&A focus is in that regard to bring in Nylon. So that's the reason. We think most of that growth in the industry from a thermoplastic point of view will be in Nylon..

All right, terrific. And then just quickly, you also mentioned in the prepared remarks some benefit from a VAM contract reset.

How lucrative was that for you in the quarter, or expected for the year?.

Well, there was just one time - we’re trying to signal a one-time impact, and we'll give you the exact number there but you need to think in terms of less than single-digit earnings per share impact for the quarter..

Terrific..

Yes..

All right. Thank you so much..

Yes, sir..

Great. Thank you. Carrie, let's go to the next question please..

All right. Our next question will come from P.J. Juvekar of Citi. Please go ahead..

Yes. Hi, good morning..

Good morning, P.J..

Mark, you had a big sequential jump in acetyls profitability, the intermediates business.

Can you explain how much of that is - that came from sort of going to spot pricing and what you had talked about shifting some contracts versus how much benefit did you get from raw materials?.

Well, there is lot of gives and takes in that. What we saw in the fourth quarter over a real high-level is we saw sort of the worse of the worst of the Chinese market, so there is the underlying thematic [ph] there that I just need to reflect on.

You also had, within that chain, the seasonality impacts of the emulsion product line, so it also weighs it down. So now the first quarter we've had some basic improvement in China, not a lot P.J., but enough to where it is noticeable to us. And then we've also seen emulsions start to do better as we get into seasonality time, especially in Europe.

So you’ve got those big two swaps there. When you look at raw materials, I'm almost feel better talking about that on an annual basis, but the big movers for us in raw materials have been ethylene.

And if you look at first to fourth quarter, there was probably - around the world, there was probably a $5 million or $6 million favorable impact for us on ethylene, so pretty modest but nonetheless some of that was realized, some of it wasn’t realized say it. But that's the kind of impact we've seen in raws.

Methanol has been more favorable with most our favorability has been in Asia, P.J., where it's been really hard to capture any of that. So we see most of our favorability occurring in ethylene, and I'd say a little bit in nat gas, which is a few million dollars around the world..

P.J., it’s Chris. I'll add a couple of things there. So there is - you get into some timing around U.S. methanol if you think through the way that played out last year. So I think your question was kind of sequential from the fourth quarter, so we were still using some methanol in the U.S.

in the fourth quarter that was procured in the third quarter, so that’s more expensive than our ongoing produced cost of methanol in the first quarter. Remember also that we have a new contract in Singapore for carbon monoxide, so you're seeing that benefit come on now as well.

We impaired that ethanol plant as discussed before, so you get a little bit of benefit that you see in the first quarter from depreciation going down.

You'll recall various footprint activities in emulsions that you now seeing paying off in terms of lower fixed costs and then the business has just continued to do a great job on productivity, and we continue to see progress and visibility to another kind of $100 million number in productivity this year.

Back to your specific question, there is just a whole lot of those small things that really added up to quite a big sequential jump in the acetyls core..

Thank you. That's helpful.

And, Mark, correct me if I'm wrong, but you see more positive on China compared to one or two quarters ago, so am I reading that right?.

Well, yes, probably so, P.J. I think if you asked me to quantify that buddy, it's hard to do that. But just on a qualitative basis, when we are out and about, no one can tolerate this situation, and so you're seeing people start to reach out, look for ways to get out of this chronic overcapacity situation.

So my view is that as we go through the year that some of this stuff is going to get resolved. It's just - it's unsustainable where it is P.J., and I guess that's what my optimism really is..

Thank you..

Thank you..

Great. Carrie, let's go to the next question please..

Our next question comes from Bob Koort of Goldman Sachs. Please go ahead..

Thanks very much. Mark, I'm curious how do you see the AEM business in terms of consistency going forward? You had a very nice volume number this quarter.

Is that something thing that's sustainable? What do you think the secular growth rate of that division is from a volume standpoint?.

Well, I think we did have - we have a really good success this quarter. We are expecting - and to be honest, we need to grow that kind of rate on an annualized basis certainly through this year, Bob. And so we're working hard to try to achieve that.

We've seen some moderation in things like auto builds and stuff that of course we have to make sure we overcome as we go forward. So that's how I would look at that. We reported that we had over 300 new projects for the quarter, which puts us at a 1,200 kind of project run rate.

You'll recall that last year we ended with little bit over a 1,000, and we are trying to march that up to 2,000 within a couple of more years. I think we've got a machine to do that, so we believe that machine is working pretty well and we are seeing good bit of volume being realized from these kind of activities..

And Chris, I'm just curious on the Acetyl Chain.

Is the impact of the ethanol write-down and the CO contract termination, is that material on a quarterly basis until UFOs [ph] or no?.

The ethanol depreciation is pretty small. The Singapore contract is a little bigger than that but we are still in single digits for the quarter sequentially..

Got it. Thanks very much..

Great. Thank you..

Carrie, let's go to the next question please..

Our next question comes from Jeff Zekauskas of JPMorgan. Please go ahead..

Hi, good morning..

Good morning, Jeff..

I think your AEM margins on an EBIT basis were up about 700 basis points year-over-year on roughly flat revenues.

How did you do that, and do you expect them to improve from here?.

Which margin? When you say margin, what line are you looking at? Do you mean….

I’m sorry. Your EBIT versus your revenues..

Okay.

So your question was which period versus which period?.

Forgive me. So in your first quarter, I think you earned around $89 million on $350 million in revenues, and last year I think you earned about $61 million on $343 million..

So, are you pulling out the affiliates in that math? Is that what you're doing?.

Yes, I am pulling out the affiliates?.

Okay. So Q1 to Q1 without affiliates. So you’ve got good volume growth like we talked about..

Sure..

You do have year-over-year, you’ve got some benefit from lower raw materials. You have continued productivity actions and you have some energy price benefits. So you add those things together, that's what’s contributing to that margin climb..

In general for the company, do you feel like your raw material spreads are widening out or contracting?.

Well, I think you asked a great question Jeff. Directionally over time they would contract. And to be honest, I haven't dug into it really rigorously to see how much real contraction occurred across the 5,000 SKUs we have quarter to quarter, but directionally as prices settle in then there will be some contraction..

Okay, great. Thank you so much..

Thanks a lot, Jeff..

Great. Carrie, let's go to the next question, please..

Our next question comes from Hassan Ahmed of Alembic Global. Please go ahead..

Good morning, Mark..

Good morning, Hassan..

The $0.30 to $0.35 EPS headwind relative to Q1 guidance that you gave, I know you talked about an element of that being turnarounds and an element of that being sort of the captured opportunity in Q1 in acetyls.

Am I understanding it correctly that the acetyls contribution to that $0.30 to $0.35 headwind was in the single digits?.

The acetyl contribution - yes, the incremental volume? Yes, that's right..

Okay. Fair enough..

The majority of that is the turnarounds and we've never taken an outage at the new POM facility, and from a statutory point of view we have to basically go into every vessel and do a bunch of testing from a German statutory point of view, so there is a huge outage and a huge cost to us there and then we have a series of VAM outrageous.

So the lion’s share of that $0.30 was, call it, those two outages that occurred..

Understood. Now on the tow side of things, as I understand it, there was some new regulations as far as cigarette packs go in India commencing April 1, and my understanding is that cigarette manufacturers in India have halted production right now.

How should we be thinking about that as it pertains to be at volumes or pricing or the like? I mean, completely understand that you guys are far more China exposed, but these things potentially could have ripple effects?.

Well, what we've - I think if you are asking about long-term consumptive effects, we don't anticipate that there is any real difference in that ongoing decline curve that is expected.

In a short-term basis, there was a little bit of volume you could probably attribute to production under the old labeling rules versus the new labeling rules that occurred in the first part of the year but it wasn't material..

Got it.

And you don't expect it to be material through the course of Q2 as well?.

No, I think it's kind of run its course now. So yes, you come up from a point of view impact in sales now we've seen those indication from the cigarette manufacturers that they expect sales will be impacted because of it..

Got it. Perfect. Thanks so much, Mark..

Thank you..

Great. Thanks. Carrie, let's go to the next question, please..

Our next question comes from Jim Sheehan of SunTrust Robinson Humphrey. Please go ahead..

Good morning.

On the $100 million in productivity gain that you expect for the year, how much did you achieve in the first quarter?.

More than a quarter of it..

Great.

And could you also elaborate on other activities? Why was that lower-than-expected?.

Well, we try to not spend money unless we have to do, so that should be good news. Look, there is such a –I'm going to go back to Mark's words and tell you that it's a pig’s breakfast. There is just a lot of different things that sit in that other category. That number is probably low relative to what we would expect for the rest of the year.

If you go look last year, kind of the same thing happened, and then Q2, Q3, Q4 were more $20 million range, so I think it's going to be at least there for the rest of the year. I mean, there is just a long list of puts and takes there. There were some currency benefits in the first quarter..

Thank you..

Jim, our productivity we - you should think, in the past, we had some big productivity numbers and what's nice about our machine is that we've evolved into dealing with much smaller numbers and do that quite well.

So we have like hundreds of programs in place to drive and make sure we achieve that $100 million year-over-year, and those things aren’t - they are not totally writable, some occur early, some occur later in the system..

Thank you so much..

Thanks Jim..

Great. Thanks. Carrie, let's go to next question please..

Our next question comes from Alexi Yefremov of Nomura. Please go ahead..

Thank you. Good morning everyone..

Good morning..

In AEM, did you build any inventory ahead of turnaround of Frankfurt, and if so, did it impact your cost basis in Q1?.

When we talk about the costs of turnaround and those headwinds in the second quarter, that includes both the direct cost of the turnaround as well as the inventory draw impact because we’ll be drawing inventories during that period..

Okay, thank you.

And back to acetate tow, do you expect to take market share in tow this year? And a related question, do you think your price declines in filter tow this year are consistent with what your major competitors will show in their result as well?.

No, so I don't think there is any material market share on part of our efforts. I mean, some customers may sell more cigarettes than other customers, so you may get - how to do I say that - the cigarette manufacturers may change market share which could impact us if we are supplying somebody is not doing quite as well in the marketplace.

But in terms of our efforts, no, we don't see any real shift in market share. Consistent? Yes, I think we are all in the same kind of boat. So my gut is they will be in the same kind of range, yes..

Great. Thanks a lot, Mark..

Thank you..

Great. Carrie, let's move to the next question..

Our next question comes from Arun Viswanathan of RBC Capital Markets. Please go ahead..

Thanks. Good morning..

Good morning..

I just want to ask a similar question. I guess, you guys had very impressive volume performance year-on-year, some of that was due to the easy comps.

But on the pricing side, I guess, do you expect these kinds of moves down on price as we go through the year, and especially in the downstream business and AEM or consumer specialties?.

Well, I think - yes, it's a great question. It’s a function really of what raw materials are going to do and overall demand in the marketplace.

We are hopeful that as we go through the year, demand will start to pick-up in some of our business, which will support pricing initiatives a bit better than we have seen in the last several months or several quarters.

So I think what I’d say is I expect our - kind of our pricing to be relatively consistent with what it is now and trending up as we go through the year..

Okay. And then just on the uses of cash, you did pay down some debt in the quarter.

Has that run its course and what are your focuses and priorities, I guess, if you could bucket them on M&A versus buybacks?.

On the buybacks, we planned to do $1 billion in 2016 and 2017, so we'll probably try to do half of that this year. Acquisitions, it depends on the size of the acquisition. If they are small, we might pay cash for them. If they are larger, there will be leverage involved..

Great. Thanks..

Thank you..

Thank you. Let's move on to the next question, Carrie..

Our next question comes from John Roberts of UBS. Please go ahead. John, your line is open if you would like to ask a question. Perhaps your line is on mute..

Okay, we will come back..

All right. Our next question and the last in our queue for today, comes from Nils Wallin of CLSA. Please go ahead..

Good morning, and thanks for taking my question..

Sure..

I was curious about the varying levels of GDP forecast you have behind your expectation for the rest of the year in order to hit the 10% earnings growth.

What type of economic growth do you see as needed in order to get at the top end?.

Yes, I wish I was a good man. We could just still GDP down into what our customer demand forecast is, so we are currently get us customer demand as opposed to national and international demand. So I don't know that we really have a strong view on GDP.

What's clear is that GDP growth globally is kind of moderating, and so our philosophy is we’ve got to go out and earn this business.

And the material side to substitution which is a big part of our play, so we try to grow our market share by not in the similar way but from taking someone else's product, a polypropylene product and selling our product in its place as an example.

So a lot of the growth in AEM that we are working on is these new projects we have in new introductions, and we think that as we go through the year that will continue to build for us. In acetyls, we are expecting that the - and this is as much GDP driven as it is just misery index.

We think the misery index in China in manufacturing is so high, it cannot last. And we do expect to see some improvement as we go through the year in that regard. And I don't know that’s really going to be reflected in any kind of big uptick in Chinese GDP..

Understood. And just to follow-up. Your SG&A numbers were down pretty significantly year-over-year and sequentially.

Is all of that productivity, or were there other some - other unique, I don't want to call it non-recurring, but other unique events that allowed you to do so well on the SG&A line and how sustainable is that?.

Let me ask you which period speaking specifically you're talking about? Do you mean Q1….

Both sequentially Q1 versus….

Yes, if you're looking sequentially, that Q4 SG&A number has potential mark-to-market in it, so it's....

Excluding that of course..

So you’ve done that math, okay. Well, I mean what we're expecting in SG&A is the continuation of downward trend from our productivity initiatives. Now you can get currency impacts in there for the periods that you're talking about, but part of the decline from ‘14 to ‘15 would have been currency related..

Understood.

So you expect that level to pretty much sustain itself in Q1?.

Yes, in absolute dollars, yes. And we expect them to trend down, but really on a big year-over-year kind of comp basis, so lot of our SG&A related productivity came in, in the middle part of last year and clearly towards the end.

So you get a little bit bigger comp probably first and second quarter this year versus last year than you will in the trailing quarters..

Got it. Thanks very much..

Thank you..

Okay, Great. Thanks Nils. Well, we appreciate everyone’s time this morning and we’ll be around for questions later today. Carrie, at this point I’ll turn the call back over to you..

Thank you, sir. The conference is now concluded. Thank you all for attending today's presentation. You may disconnect your lines at this time. Have a great day..