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Celanese boosts engineered materials with SoFTer deal

Posted on November 8th, 2016 by in Chemicals Industry News and Analysis

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Celanese’s pending acquisition of the Italian compounder SoFTer Group will further increase the company’s exposure in engineered materials.

The deal will not change Celanese’s place as one of the largest producers of acetyls in the world. This will remain, and Celanese will continue making acetate flake, acetate film and acetate tow under its Consumer Specialties unit – as well as ethylene vinyl acetate (EVA) under Industrial Specialties and acetic acid, vinyl acetate monomer (VAM) and acetate esters under Acetyl Intermediates.

But the contribution from the company’s advanced engineered-materials has been growing, as shown in the chart below, which tracks operating profit from the company’s four segments since 2010.

Operating profit image

Celanese has been talking about expanding its engineered-materials business for much of this year, with an eye on the automotive sector. CEO Mark Rohr explained why automobiles are an attractive end-market during an interview at the American Chemistry Council’s (ACC) annual meeting in June.

“There is a shift to producing better quality products – in appearance, lighter weight and temperature resistance. Everyone is constantly upgrading physical qualities, and there is much more attention to that kind of detail,” Rohr told ICIS.

“Growth for these products grows even as overall demand weakens, as you can’t make a me-too product and be successful in a low-demand world,” he added.

This is exemplified in the lower tiers of the automobile industry, where these companies have to compete with top-tiered producers on quality and appearance, Rohr said.

Automobiles are already an important end market for Celanese’s resins. To increase its exposure to this market, Celanese recently added a nylon platform to its portfolio of engineering plastics.

The SoFTer acquisition will increase this exposure further. It will nearly double the number of Celanese’s product platforms for engineered materials, bringing it from nine to 17.

Because SoFTer is based in Italy, its products were already qualified for European vehicles.

The company’s plants include one in Silao de la Victoria, Guanajuato state in Mexico. This has good access to Mexico’s major manufacturing hubs in Queretaro, Guanajuato and San Luis Potosi. As of March 2016, the Silao plant had six lines, and it can add three more.

In 2014, at its plant in Rio Grande do Sul state in Brazil, the company began making polypropylene (PP) compounds, polyamide (PA) compounds and polybutylene terephthalate (PBT) compounds as well as engineered thermoplastics.

That same year, the company started making engineering plastics at its new plant in Lebanon, Tennessee in the US.

SoFTer’s other plants are in Italy. It has a sales office in Germany.

For all of its sites, SoFTer ultimately plans to provide a full product line at each.

SoFTer’s footprint complement’s Celanese’s. While SoFTer has one plant in the US, Celanese’s advanced engineered-materials has several.

The Celanese business unit has one Brazilian plant near Sao Paulo and none in Mexico. Its European plants are in Germany. It has several in Asia-Pacific, while SoFTer has none.

The table below shows the plants in Celanese’s advanced engineered-materials segment.

Celanese plants

The table is based on information from Celanese’s 2015 annual report, so it does not include information about its new nylon platform.

For products, there is some overlap, since both companies supply nylon and PBT products. However, SoFTer does not specify any polyoxymethylene (POM or polyacetal) products or ultra-high molecular-weight polyethylene (UHMW-PE).

Meanwhile, SoFTer offers several thermoplastic elastomers (TPEs) as well as polycarbonate (PC), acrylonitrile-butadiene-styrene (ABS) high-impact polystyrene (HIPS) and polyphenylene oxide (PPE) compounds among others.

The acquisitions should provide Celanese with larger positions with its customers as well as quite a number of manufacturing and supply-chain improvements, said Scott Sutton, Celanese executive vice president and president of materials solutions. He made his comments during an earnings conference call.

“There will be very good integration of customers and channels as well as we get those additional selling opportunities,” Sutton said.

During the same call, Rohr said, “This is a natural and thoughtful step forward in the evolution of our engineering-materials business.”

The deal should close in the fourth quarter. Celanese did not disclose the terms of the acquisition, but it did provide some details about SoFTer’s performance during the earnings conference call.

Its margins are lower than Celanese’s but there is a lot of opportunity for synergies, Sutton said. Annual revenue is about $300m.

Additional reporting by Joseph Chang

The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle. ICIS tracks the movement of petrochemical raw material costs in auto production both globally and regionally with the weighted ICIS Basket of Automotive Petrochemicals (IBAP).

ICIS produces a monthly Global Automotive report covering the major automotive chemicals markets, the auto-industry, the IBAPs and macroeconomic trends.

 

To find out how to read more news and analysis stories from ICIS, go to www.icis.com/about/news/


 

All opinions shared in this post are the author’s own.

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