Celanese Corp: Form 10-Q for the period ended Jun 30, 2024

In this Quarterly Report on Form 10-Q ("Quarterly Report"), the term "Celanese" refers to Celanese Corporation, a Delaware corporation, and not its subsidiaries. The terms the "Company," "we," "our" and "us," refer to Celanese and its subsidiaries on a consolidated basis. The term "Celanese U.S." refers to the Company's subsidiary, Celanese US Holdings LLC, a Delaware limited liability company, and not its subsidiaries.

The following discussion should be read in conjunction with the Celanese Corporation and Subsidiaries consolidated financial statements as of and for the year ended December 31, 2023 filed on February 23, 2024 with the Securities and Exchange Commission ("SEC") as part of the Company's Annual Report on Form 10-K ("2023 Form 10-K") and the unaudited interim consolidated financial statements and notes to the unaudited interim consolidated financial statements herein, which are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Investors are cautioned that the forward-looking statements contained in this section and other parts of this Quarterly Report involve both risk and uncertainty. Several important factors could cause actual results to differ materially from those anticipated by these statements. Many of these statements are macroeconomic in nature and are, therefore, beyond the control of management. See "Forward-Looking Statements" below and at the beginning of our 2023 Form 10-K.

Forward-Looking Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and other parts of this Quarterly Report contain certain forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, us. Generally, words such as "believe," "expect," "intend," "estimate," "anticipate," "project," "plan," "may," "can," "could," "might," and "will," and similar expressions, as they relate to us are intended to identify forward-looking statements. These statements reflect our current views and beliefs with respect to future events at the time that the statements are made, are not historical facts or guarantees of future performance and involve risks and uncertainties that are difficult to predict and many of which are outside of our control. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. All forward-looking statements made in this Quarterly Report are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this Quarterly Report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in our expectations or otherwise.

Risk Factors

See Part I - Item 1A. Risk Factors of our 2023 Form 10-K for a description of certain risk factors that you should consider which could significantly affect our financial results. In addition, the following factors, among others, could cause our actual results to differ materially from those results, performance or achievements that may be expressed or implied by such forward-looking statements:

• changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate;
• the length and depth of product and industry business cycles particularly in the automotive, electrical, textiles, electronics and construction industries;
• volatility or changes in the price and availability of raw materials and energy, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, carbon monoxide, wood pulp, hexamethylene diamine and fuel oil and the prices for electricity and other energy sources;
• the ability to pass increases in raw materials prices, logistics costs and other costs on to customers or otherwise improve margins through price increases;
• the possibility that we will not be able to timely or effectively continue to integrate the Mobility & Materials business (the "M&M Business") we acquired from DuPont de Nemours, Inc. (the "M&M Acquisition") in order to realize the anticipated benefits of the M&M Acquisition, including synergies and growth opportunities, whether as a result of difficulties arising from the operation of the M&M Business or other unanticipated delays, costs, inefficiencies or liabilities;
• increased commercial, legal or regulatory complexity of entering into, or expanding our exposure to, certain end markets and geographies;
• risks in the global economy and equity and credit markets and their potential impact on our ability to pay down debt in the future and/or refinance at suitable rates, in a timely manner, or at all;
• risks and costs associated with increased leverage from the M&M Acquisition, including increased interest expense and potential reduction of business and strategic flexibility;
• the ability to maintain plant utilization rates and to implement planned capacity additions, expansions and maintenance;
• the ability to reduce or maintain current levels of production costs and to improve productivity by implementing technological improvements to existing plants;
• increased price competition and the introduction of competing products by other companies;
• the ability to identify desirable potential acquisition or divestiture opportunities and to complete such transactions, including obtaining regulatory approvals, consistent with our strategy;
• market acceptance of our products and technology;
• compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, transportation, logistics or supply chain disruptions, cybersecurity incidents, terrorism or political unrest, public health crises (including, but not limited to, the COVID-19 pandemic), or other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the direct or indirect consequences of acts of war or conflict (such as the Russia-Ukraine conflict or the Israel-Hamas conflict) or terrorist incidents or as a result of weather, natural disasters, or other crises;
• the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to us;
• changes in applicable tariffs, duties and trade agreements, tax rates or legislation throughout the world including, but not limited to, anti-dumping and countervailing duties, adjustments, changes in estimates or interpretations or the resolution of tax examinations or audits that may impact recorded or future tax impacts and potential regulatory and legislative tax developments in the United States and other jurisdictions;
• changes in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property;
• potential liability for remedial actions and increased costs under existing or future environmental, health and safety regulations, including those relating to climate change or other sustainability matters;
• potential liability resulting from pending or future claims or litigation, including investigations or enforcement actions, or from changes in the laws, regulations or policies of governments or other governmental activities, in the countries in which we operate;
• changes in currency exchange rates and interest rates; and
• various other factors, both referenced and not referenced in this Quarterly Report.

Many of these factors are macroeconomic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, affect us in ways or to an extent that we currently do not expect or consider to be significant, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this Quarterly Report as anticipated, believed, estimated, expected, intended, planned or projected. We neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates.

Overview

We are a global chemical and specialty materials company. We are a leading global producer of high performance engineered polymers that are used in a variety of high-value applications, as well as one of the world's largest producers of acetyl products, which are intermediate chemicals for nearly all major industries. As a recognized innovator in the chemicals industry, we engineer and manufacture a wide variety of products essential to everyday living. Our broad product portfolio serves a diverse set of end-use applications including automotive, chemical additives, construction, consumer and industrial adhesives, medical, consumer electronics, energy storage, filtration, paints and coatings, paper and packaging, industrial applications and textiles.

Our products enjoy leading global positions due to our differentiated business models, large global production capacity, operating efficiencies, proprietary technology and competitive cost structures.

Our large and diverse global customer base primarily consists of major companies across a broad array of industries. We hold geographically balanced global positions and participate in diversified end-use applications. We combine a demonstrated track record of execution, strong performance built on differentiated business models and a clear focus on growth and value creation. Known for operational excellence, reliability and execution of our business strategies, we partner with our customers around the globe to deliver best-in-class technologies and solutions.

Results of Operations

Financial Highlights

(unaudited)

(In $ millions, except percentages)

(1) Defined as Operating profit (loss) divided by Net sales.

(unaudited)

Factors Affecting Business Segment Net Sales

The percentage increase (decrease) in Net sales attributable to each of the factors indicated for each of our business segments is as follows:

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

(unaudited)

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

(unaudited)

Consolidated Results

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Net sales decreased $144 million, or 5%, for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower pricing, driven by our Acetyl Chain segment due to a more balanced global demand and supply environment, as well as our Engineered Materials segment due to competitive markets, decreased energy surcharges and product mix;
• lower volume in our Engineered Materials segment, primarily driven by the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information), as well as lower volume for acetate tow within our Acetyl Chain segment primarily in Asia; and
• an unfavorable currency impact, primarily resulting from a weaker Chinese Yuan ("CNY") and Japanese Yen ("JPY") relative to the U.S. dollar;

partially offset by:

• higher volume in our Acetyl Chain segment for most of our products, primarily vinyl acetate monomer ("VAM") and emulsion polymers in Europe and Asia, respectively.

Operating profit decreased $85 million, or 25%, for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower Net sales across our segments;
• an unfavorable impact of $38 million to Other (charges) gains, net primarily related to restructuring costs in our Engineered Materials segment for the previously announced closure of our facility in Mechelen, Belgium and our polymerization units in Uentrop, Germany (see Note 18 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information); and
• higher accelerated depreciation expense of $11 million in our Engineered Materials segment, primarily related to the previously announced closure of our facility in Mechelen, Belgium (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);

partially offset by:

• lower raw materials costs in our Engineered Materials and Acetyl Chain segments;
• lower spending in our Engineered Materials segment primarily driven by a reduction in distribution and administrative costs; and
• lower functional spending and incentive compensation costs in our Other Activities segment.

Equity in net earnings (loss) of affiliates increased $28 million or 122%, for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• an increase in earnings from our Mylar Specialty Films (formally DuPont Teijin Films) strategic affiliates of $15 million primarily due to increased restructuring costs incurred in the three months ended June 30, 2023; and
• an increase in earnings from our Ibn Sina strategic affiliate, primarily as a result of higher methyl tertiary-butyl ether ("MTBE") volume and margin, partially offset by lower methanol sales volume.

Our effective income tax rate for the three months ended June 30, 2024 was 16% compared to a tax benefit of 2% for the same period in 2023, primarily due to non-recurring tax effects related to internal debt restructuring transactions for the three months ended June 30, 2024, prior year non-recurring decreases in valuation allowances on U.S. foreign tax credit carryforwards due to changes in forecasted foreign sourced income and expenses during the carryforward period for the three months ended June 30, 2023, and increased earnings in high-taxed jurisdictions related to improved economic conditions. See Note 11 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Net sales decreased $386 million, or 7%, for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower pricing, driven by our Acetyl Chain segment due to a more balanced global demand and supply environment, as well as our Engineered Materials segment due to competitive markets, decreased energy surcharges and product mix;
• lower volume in our Engineered Materials segment, primarily driven by the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information), as well as lower volume for acetate tow within our Acetyl Chain segment primarily in Asia; and
• an unfavorable currency impact, primarily resulting from a weaker CNY and JPY relative to the U.S. dollar;

partially offset by:

• higher volume in our Acetyl Chain segment for most of our products, primarily acid and VAM in Asia.

Operating profit decreased $126 million, or 22%, for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower Net sales across our segments;
• higher accelerated depreciation expense of $56 million in our Engineered Materials segment, primarily related to the previously announced closure of our polymerization units in Uentrop, Germany and our facility in Mechelen, Belgium (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);
• higher spending in our Acetyl Chain segment of $49 million, primarily as a result of plant turnaround costs related to our joint venture, Fairway Methanol LLC, and inventory impacts of increased demand in downstream derivative products;
• an unfavorable impact of $29 million to Other (charges) gains, net primarily related to restructuring costs for the previously announced closure of our facility in Mechelen, Belgium and our polymerization units in Uentrop, Germany, partially offset by decreased restructuring costs for Company-wide business optimization projects (see Note 18 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information); and
• higher functional spending of $13 million in our Other Activities segment, primarily due to costs arising from IT integration activities;

partially offset by:

• lower raw materials costs in our Engineered Materials and Acetyl Chain segments;
• lower spending in our Engineered Materials segment primarily driven by a reduction in distribution and administrative costs; and
• lower merger and acquisition project spending and incentive compensation costs of $18 million in our Other Activities segment.

Equity in net earnings (loss) of affiliates increased $68 million or 179%, for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• an increase in earnings from our Mylar Specialty Films (formally DuPont Teijin Films) strategic affiliates of $33 million primarily due to increased restructuring costs incurred in the six months ended June 30, 2023; and
• an increase in earnings from our Ibn Sina strategic affiliate, primarily as a result of higher MTBE volume and margin, partially offset by lower methanol sales volume.

Our effective income tax rate for the six months ended June 30, 2024 was 18% compared to 6% for the same period in 2023. The higher effective income tax rate was primarily due to non-recurring tax effects related to internal debt restructuring transactions and increased earnings in high-taxed jurisdictions related to improved economic conditions. See Note 11 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.

Business Segments

Engineered Materials

(unaudited)

(In $ millions, except percentages)

Our Engineered Materials segment includes our engineered materials business and certain strategic affiliates. Our engineered materials business develops, produces and supplies a broad portfolio of high performance specialty polymers for automotive and medical applications, as well as industrial products and consumer electronics. Together with our strategic affiliates, our engineered materials business is a leading participant in the global specialty polymers industry.

The pricing of products within the Engineered Materials segment is primarily based on the value of the material we produce and is generally independent of changes in the cost of raw materials, but may be impacted during periods of inflation and increased costs. Therefore, in general, margins may expand or contract in response to changes in raw materials costs. We attempt to address increases in raw materials costs through appropriate pricing actions.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Net sales decreased for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower pricing for most of our products, primarily due to competitive markets, decreased energy surcharges, and product mix;
• lower volume, primarily driven by the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information), partially offset by higher volume, principally in polyoxymethylene ("POM"), in Europe and Asia; and
• an unfavorable currency impact, primarily resulting from a weaker CNY and JPY relative to the U.S. dollar.

Operating profit decreased for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower Net sales;
• an unfavorable impact of $35 million to Other (charges) gains, net primarily related to restructuring costs for the previously announced closure of our facility in Mechelen, Belgium and our polymerization units in Uentrop, Germany (see Note 18 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information); and
• higher accelerated depreciation expense of $11 million, primarily related to the previously announced closure of our facility in Mechelen, Belgium (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information);

partially offset by:

• lower raw materials costs for most of our products; and
• lower spending of $40 million, primarily driven by a reduction in distribution and administrative costs.

Equity in net earnings (loss) of affiliates increased for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• an increase in earnings from our Mylar Specialty Films (formally DuPont Teijin Films) strategic affiliates of $15 million primarily due to increased restructuring costs incurred in the three months ended June 30, 2023; and
• an increase in earnings from our Ibn Sina strategic affiliate, primarily as a result of higher MTBE volume and margin, partially offset by lower methanol sales volume.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Net sales decreased for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower pricing for most of our products, primarily due to competitive markets, product mix, and decreased energy surcharges;
• lower volume, primarily driven by the formation of the Nutrinova joint venture (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information), partially offset by higher volume, principally in POM, in Europe and Asia; and
• an unfavorable currency impact, primarily resulting from a weaker CNY and JPY relative to the U.S. dollar.

Operating profit decreased for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower Net sales;
• higher accelerated depreciation expense of $56 million, primarily related to the previously announced closure of our polymerization units in Uentrop, Germany and our facility in Mechelen, Belgium (see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements for further information); and
• an unfavorable impact of $25 million to Other (charges) gains, net primarily related to restructuring costs for the previously announced closure of our facility in Mechelen, Belgium and our polymerization units in Uentrop, Germany, partially offset by decreased restructuring costs for Company-wide business optimization projects (see Note 18 - Other (Charges) Gains, Net in the accompanying unaudited interim consolidated financial statements for further information);

partially offset by:

• lower raw materials costs for most of our products; and
• lower spending of $75 million, primarily driven by a reduction in distribution and administrative costs.

Equity in net earnings (loss) of affiliates increased for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• an increase in earnings from our Mylar Specialty Films (formally DuPont Teijin Films) strategic affiliates of $33 million primarily due to increased restructuring costs incurred in the six months ended June 30, 2023; and
• an increase in earnings from our Ibn Sina strategic affiliate, primarily as a result of higher MTBE volume and margin, partially offset by lower methanol sales volume.

Acetyl Chain

(unaudited)

(In $ millions, except percentages)

Our Acetyl Chain segment, which includes the integrated chain of our intermediate chemistry, emulsion polymers, ethylene vinyl acetate polymers, redispersible powders and acetate tow businesses, is active in every major global industrial sector and serves diverse consumer end-use applications. These include conventional uses, such as paints, coatings, adhesives, and filter products, as well as other unique, high-value end uses including flexible packaging, thermal laminations, pharmaceuticals, wire and cable, and compounds. Together with our strategic affiliates, our Acetyl Chain businesses are leading producers and suppliers in multiple global industrial sectors.

The pricing of products within the Acetyl Chain is influenced by industry utilization rates and changes in the cost of raw materials. Therefore, in general, there is a directional correlation between these factors and our Net sales for most Acetyl Chain products. This impact to pricing typically lags changes in raw materials costs over months or quarters.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Net sales decreased for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower pricing for our products due to a more balanced global demand and supply environment; and
• lower volume for acetate tow primarily in Asia due to reduced seasonality;

partially offset by:

• higher volume for most of our products, primarily VAM and emulsion polymers in Europe and Asia, respectively.

Operating profit decreased for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower Net sales;

partially offset by:

• lower raw materials and sourcing costs, primarily for methanol and carbon monoxide.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Net sales decreased for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower pricing for our products due to a more balanced global demand and supply environment; and
• lower volume for acetate tow primarily in Asia due to reduced seasonality;

partially offset by:

• higher volume for most of our products, primarily acid and VAM in Asia.

Operating profit decreased for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• lower Net sales; and
• higher spending of $49 million, primarily as a result of plant turnaround costs related to our joint venture, Fairway Methanol LLC, and inventory impacts of increased demand in downstream derivative products;

partially offset by:

• lower raw materials and sourcing costs, primarily for carbon monoxide, methanol and ethanol.

Other Activities

(unaudited)

(In $ millions, except percentages)

Our Other Activities segment primarily consists of corporate center costs, including administrative activities such as finance, information technology and human resource functions, interest income and expense associated with financing activities and results of our captive insurance companies. The Other Activities segment also includes the components of net periodic benefit cost (interest cost, expected return on assets and net actuarial gains and losses) for our defined benefit pension plans and other postretirement plans not allocated to our business segments.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Operating loss increased for the three months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• an unfavorable currency impact of $25 million;

partially offset by:

• lower functional spending and incentive compensation costs.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Operating loss increased for the six months ended June 30, 2024 compared to the same period in 2023, primarily due to:

• an unfavorable currency impact of $19 million; and
• higher functional spending of $13 million, primarily due to costs arising from IT integration activities;

partially offset by:

• lower merger and acquisition project spending of $18 million; and
• lower incentive compensation costs.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents, dividends from our portfolio of strategic investments and available borrowings under our senior unsecured revolving credit facilities. As of June 30, 2024, we have $1.75 billion available for borrowing under our senior U.S. unsecured revolving credit facility and $62 million available for borrowing under our separate China Revolving Credit Facilities (defined below), if required, to meet our working capital needs and other contractual obligations. In addition, we held cash and cash equivalents of $1.2 billion as of June 30, 2024. We are actively managing our business to maintain and improve cash flow and reduce our debt, and we believe that liquidity from the above-referenced sources will be sufficient to meet our operational and capital investment needs and financial obligations for the foreseeable future.

On February 29, 2024, we announced the intended closure of our facility in Mechelen, Belgium to optimize production costs across our global network. These operations are included in the Engineered Materials segment. We expect to incur additional exit and shutdown costs related to the closure of the facility of approximately $68 million, inclusive of estimated employee termination costs, through 2028. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements.

In October 2023, we announced the intended closure of our Polyamide 66 ("PA66") and High-Performance Nylon ("HPN") polymerization units at our facility in Uentrop, Germany to optimize production costs across our global network. These operations are included in the Engineered Materials segment. We expect to incur additional exit and shutdown costs related to the closure of the PA66 and HPN polymerization units in Uentrop, Germany of approximately $11 million, inclusive of estimated employee termination costs, through 2027. See Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements.

In September 2023, we formed a food ingredients joint venture with Mitsui & Co., Ltd. ("Mitsui") under the name Nutrinova. We contributed receivables, inventory, property, plant and equipment, certain other assets, liabilities, technology and employees of our food ingredients business while retaining a 30% interest in the joint venture. Mitsui acquired the remaining 70% interest in the food ingredients business for a purchase price of $503 million, subject to transaction adjustments. We are accounting for our interest in the joint venture as an equity method investment, and our portion of the results continues to be included in the Engineered Materials segment. For further information regarding the food ingredients joint venture, see Note 3 - Acquisitions, Dispositions and Plant Closures in the accompanying unaudited interim consolidated financial statements.

Our incurrence of debt to finance the purchase price for a majority of the Mobility & Materials business (the "M&M Business") acquired from DuPont de Nemours, Inc. in November 2022 (the "M&M Acquisition") has increased our leverage and our ratio of indebtedness to consolidated EBITDA as set forth in our senior unsecured credit facilities. We believe that cash flows from our operations, together with cash generation, synergy opportunities from the M&M Acquisition and cost reduction initiatives, will support our deleveraging efforts over the next few years. In furtherance of these deleveraging efforts, we have paused our share repurchase program and are in the process of evaluating additional cash generation opportunities which may also include, in addition to the food ingredients joint venture described above, additional opportunistic dispositions or monetization of other product or business lines or other assets. We are committed to rapid deleveraging and to maintaining our investment grade debt rating.

While our contractual obligations, commitments and debt service requirements over the next several years are significant, we continue to believe we will have available resources to meet our liquidity requirements, including debt service, for the next 12 months. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may be required to use other means available to us such as increasing our borrowings, reducing or delaying capital expenditures, seeking additional capital or seeking to restructure or refinance our indebtedness. There can be no assurance, however, that we will continue to generate cash flows at or above current levels.

We have focused our near-term capital expenditures on required maintenance projects, productivity improvements, and selected short term growth projects, as we continue to prioritize deleveraging and expect total capital expenditures to be approximately $425 million in 2024. In Engineered Materials, at our Nanjing, China facility, our expansions of (1) the compounding plant and (2) the new liquid crystal polymer ("LCP") plant are on schedule and in construction. At our Bishop, Texas facility, our debottleneck of the ultra-high molecular weight polyethylene ("UHMW-PE") unit is on schedule and in detailed engineering design while construction is delayed approximately 12 months. Our energy optimization productivity and greenhouse gas reduction project at our polyoxymethylene ("POM") unit in Frankfurt, Germany is on schedule in detailed engineering design. In the Acetyl Chain, our vinyl acetate ethylene ("VAE") emulsions unit in Nanjing, China was successfully commissioned in the first quarter of 2024, started in the second quarter of 2024 on schedule and is operating as designed. Our planned expansion of our VAE emulsion plant in Frankfurt, Germany is in construction and on schedule for start-up in the second quarter of 2025.

We continue to see the investments made in recent years strengthen the growth and reliability, while lowering the carbon footprint, of our manufacturing network to best serve our customers.

On a stand-alone basis, Celanese and its immediate 100% owned subsidiary, Celanese U.S., have no independent external operations of their own. Accordingly, they generally depend on the cash flow of their subsidiaries and their ability to pay dividends and make other distributions to Celanese and Celanese U.S. in order to meet their obligations, including their obligations under senior credit facilities and senior notes, and to pay dividends on our Common Stock.

We are subject to capital controls and exchange restrictions imposed by the local governments in certain jurisdictions where we operate, such as China, South Korea, India and Indonesia. Capital controls impose limitations on our ability to exchange currencies, repatriate earnings or capital, lend via intercompany loans or create cross-border cash pooling arrangements. Our largest exposure to a country with capital controls is in China. Pursuant to applicable regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the Chinese government imposes certain currency exchange controls on cash transfers out of China, puts certain limitations on duration, purpose and amount of intercompany loans, and restricts cross-border cash pooling. While it is possible that future tightening of these restrictions or application of new similar restrictions could impact us, these limitations do not currently restrict our operations.

We remain in compliance with the covenants in the Global Credit Agreements (defined below) and expect to remain in compliance based on our current expectation of future results of operations and planned cash generation activities. If the actual future results of our operations and cash generation activities differ materially from these expectations, we may be required to seek an amendment to or waiver of any impacted covenants, which may increase our borrowing costs under the Global Credit Agreements.

Cash Flows

Cash and cash equivalents decreased $620 million to $1.2 billion as of June 30, 2024 compared to December 31, 2023. As of June 30, 2024, $993 million of the $1.2 billion of cash and cash equivalents was held by our foreign subsidiaries. Under the Tax Cuts and Jobs Act, we incurred a prior year charge associated with the deemed repatriation of foreign earnings. These funds are largely accessible without additional material tax consequences, if needed in the U.S., to fund operations.

• Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities decreased $273 million to $393 million for the six months ended June 30, 2024 compared to net cash provided by operating activities of $666 million for the same period in 2023, primarily due to:

• an increase in cash taxes paid of $98 million;
• unfavorable trade working capital of $80 million, primarily due to inventory increases compared to prior year reductions partially offset by lower raw materials costs, the timing of collections of trade receivables, and settlement of trade payables during the six months ended June 30, 2024;
• a decrease in cash receipts of non-trade receivables of $72 million, primarily related to receivable balances arising from the M&M Acquisition and transition activities in the six months ended June 30, 2023, which did not recur in the current year; and
• a decrease in Net earnings.
• Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities decreased $99 million to $242 million for the six months ended June 30, 2024 compared to net cash used in investing activities of $341 million for the same period in 2023; primarily due to:

• a decrease of $67 million in capital expenditures during the six months ended June 30, 2024; and
• settlement of a cross currency swap agreement of $17 million.
• Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities increased $232 million to $748 million for the six months ended June 30, 2024 compared to net cash used in financing activities of $516 million for the same period in 2023, primarily due to:

• an increase in payments on long-term debt, primarily due to the $473 million payment at maturity of the 3.500% senior unsecured notes; and
• an increase in net payments on our China Working Capital Term Loan Agreement (defined below) and revolving credit facilities;

partially offset by:

• a decrease in net payments on short-term debt, primarily as a result of a payment of $370 million on our March 2022 U.S. Term Loan Credit Agreement (defined below) during the six months ended June 30, 2023, which did not recur in the current year; and
• an increase in borrowings on long-term debt, primarily due to borrowings on working capital loan facilities in China.

Debt and Other Obligations

• Senior Credit Facilities

In March 2022, we entered into a term loan credit agreement (as amended to date, the "March 2022 U.S. Term Loan Credit Agreement"), pursuant to which lenders provided a tranche of delayed-draw term loans due 364 days from issuance in an amount equal to $500 million (the "364-day Term Loans") and a tranche of delayed-draw term loans due 5 years from issuance in an amount equal to $1.0 billion (the "5-year Term Loans"). The 364-day Term Loans have been fully repaid.

Also in March 2022, we entered into a new revolving credit agreement (as amended to date, the "U.S. Revolving Credit Agreement" and, together with the March 2022 U.S. Term Loan Credit Agreement the "U.S. Credit Agreements") consisting of a $1.75 billion senior unsecured revolving credit facility (with a letter of credit sublimit), maturing in 2027.

In August 2023, we amended certain covenants in the March 2022 U.S. Term Loan Credit Agreement to permit refinancing of certain senior notes without requiring a mandatory prepayment under the March 2022 U.S. Term Loan Credit Agreement.

On February 16, 2024 and February 21, 2023, we amended certain covenants in the U.S. Credit Agreements, including financial ratio maintenance covenants.

The U.S. Credit Agreements are guaranteed by Celanese, Celanese U.S. and domestic subsidiaries together representing substantially all of our U.S. assets and business operations (the "Subsidiary Guarantors").

In January 2023, Celanese (Shanghai) International Trading Co., Ltd ("CSIT"), a fully consolidated subsidiary, entered into a restatement of an existing credit facility agreement (the "China Revolving Credit Agreement") to upsize and modify the facility thereunder to consist of an aggregate CNY1.75 billion uncommitted senior unsecured revolving credit facility available under two tranches (with overdraft, bank guarantee and documentary credit sublimits) (the "CSIT January 2023 Facility", and together with any other revolving credit facilities available to our subsidiaries in China, the "China Revolving Credit Facilities"). Obligations bear interest at certain fixed and floating rates. On April 7, 2024, the CSIT January 2023 Facility was reduced to CNY750 million. The China Revolving Credit Agreement is guaranteed by Celanese U.S.

Also in January 2023, CSIT entered into a senior unsecured working capital loan contract for CNY800 million (the "China Working Capital Term Loan Agreement"), payable 12 months from withdrawal date and bearing interest at 0.5% less than certain interbank rates. The loan under the China Working Capital Term Loan Agreement was fully drawn in January 2023 and was supported by a letter of comfort from us. The China Working Capital Term Loan Agreement was fully repaid in the three months ended March 31, 2024.

In December 2023, Celanese (Nanjing) Chemical Co., Ltd. ("CNC") entered into a senior unsecured working capital loan agreement for CNY800 million, payable on December 25, 2026 and bearing interest at 2.8% (the "CNC Working Capital Loan Agreement"). The loan under the CNC Working Capital Loan Agreement was fully drawn during the three months ended March 31, 2024.

On June 28, 2024, CNC entered into a senior unsecured working capital loan agreement for CNY800 million, payable in installments until June 28, 2027 and bearing interest at 2.75% (the "CNC Three Year Working Capital Loan Agreement," together with the China Revolving Credit Agreement, the China Working Capital Term Loan Agreement and the CNC Working Capital Loan Agreement, the "China Credit Agreements," and the China Credit Agreements together with the U.S. Credit Agreements, the "Global Credit Agreements"). The CNC Three Year Working Capital Loan Agreement was not drawn during the three months ended June 30, 2024. We expect the China Credit Agreements will continue to facilitate our efficient repatriation of cash to the U.S. to repay debt and effectively redomicile a portion of our U.S. debt to China at a lower average interest rate.

Subsequent to June 30, 2024, we drew $400 million from our U.S. Revolving Credit Facility. This borrowing and cash on hand were used primarily to repay in full our senior unsecured notes, with an interest rate of 5.900%, due on July 5, 2024.

• Senior Notes

In August 2023, we completed a public offering registered under the Securities Act of senior unsecured notes as follows (collectively, the "2023 Offering"):

Also, in August 2023, we completed a cash tender offer for $2.25 billion in aggregate principal amount (the "Tender Offer") as follows:

The net proceeds from the 2023 Offering were used (i) to fund the Tender Offer and (ii) for the repayment of other outstanding indebtedness, including the payment in full of the 364-day Term Loans and certain 3-year term loans pursuant to a term loan credit agreement entered into in September 2022.

There have been no material changes to our debt or other obligations described in our 2023 Form 10-K other than those disclosed above and in Note 7 - Debt in the accompanying unaudited interim consolidated financial statements.

• Accounts Receivable Purchasing Facility

In June 2023, we entered into an amendment to the amended and restated receivables purchase agreement under our U.S. accounts receivable purchasing facility among certain of our subsidiaries, our wholly-owned, "bankruptcy remote" special purpose subsidiary ("SPE") and certain global financial institutions ("Purchasers"). We de-recognized $728 million and $1.4 billion of accounts receivable under this agreement for the six months ended June 30, 2024 and year ended December 31, 2023, respectively, and collected $710 million and $1.3 billion of accounts receivable sold under this agreement during the same periods. Unsold U.S. accounts receivable of $136 million were pledged by the SPE as collateral to the Purchasers as of June 30, 2024.

• Factoring and Discounting Agreements

We have factoring agreements in Europe, Singapore and China with financial institutions. We de-recognized $347 million and $423 million of accounts receivable under these factoring agreements for the six months ended June 30, 2024 and year ended December 31, 2023, respectively, and collected $264 million and $407 million of accounts receivable sold under these factoring agreements during the same periods.

We have master discounting agreements (the "Master Discounting Agreements") with financial institutions in China to discount, on a non-recourse basis, banker's acceptance drafts, classified as accounts receivable. We received $64 million and $45 million from the accounts receivable transferred under the Master Discounting Agreements as of June 30, 2024 and December 31, 2023, respectively.

Covenants

The Company's material financing arrangements contain customary covenants, such as events of default and change of control provisions, and in the case of the U.S. Credit Agreements the maintenance of certain financial ratios (subject to adjustment following certain qualifying acquisitions and dispositions, as set forth in the U.S. Credit Agreements, as amended). Failure to comply with these covenants, or the occurrence of any other event of default, could result in acceleration of the borrowings and other financial obligations.

We are in compliance with the covenants in our material financing arrangements as of June 30, 2024.

See Note 7 - Debt in the accompanying unaudited interim consolidated financial statements for further information.

Guarantor Financial Information

We have outstanding senior unsecured notes, issued in public offerings registered under the Securities Act of 1933, as amended (collectively, the "Senior Notes"). The Senior Notes were issued by Celanese U.S. ("Issuer") and are guaranteed by Celanese Corporation ("Parent Guarantor") and the Subsidiary Guarantors (collectively the "Obligor Group"). See Note 7 - Debt in the accompanying unaudited interim consolidated financial statements for further information. The Issuer and Subsidiary Guarantors are 100% owned subsidiaries of the Parent Guarantor. The Subsidiary Guarantors are listed in Exhibit 22.1 to this Quarterly Report.

The Parent Guarantor and the Subsidiary Guarantors have guaranteed the Senior Notes on a full and unconditional, joint and several, senior unsecured basis. The guarantees are subject to certain customary release provisions, including that a Subsidiary Guarantor will be released from its respective guarantee in specified circumstances, including (i) the sale or transfer of all of its assets or capital stock; (ii) its merger or consolidation with, or transfer of all or substantially all of its assets to, another person; or (iii) its ceasing to be a majority-owned subsidiary of the Issuer in connection with any sale of its capital stock or other transaction. Additionally, a Subsidiary Guarantor will be released from its guarantee of the Senior Notes at such time that it ceases to guarantee the Issuer's obligations under the U.S. Credit Agreements (subject to the satisfaction of customary document delivery requirements). The obligations of the Subsidiary Guarantors under their guarantees are limited as necessary to prevent such guarantees from constituting a fraudulent conveyance or fraudulent transfer under applicable law.

The Parent Guarantor and the Issuer are holding companies that conduct substantially all of their operations through their subsidiaries, which own substantially all of our consolidated assets. The Parent Guarantor holds the stock of its immediate 100% owned subsidiary, the Issuer, but has no material consolidated assets. The principal source of cash to pay the Parent Guarantor's and the Issuer's obligations, including obligations under the Senior Notes and the guarantee of the Issuer's obligations under the U.S. Credit Agreements, is the cash that our subsidiaries generate from their operations. Each of the Subsidiary Guarantors and our non-guarantor subsidiaries is a distinct legal entity and, under certain circumstances, applicable country or state laws, regulatory limitations and terms of other debt instruments may limit our subsidiaries' ability to distribute cash to the Issuer and the Parent Guarantor.

For cash management purposes, we transfer cash among the Parent Guarantor, Issuer, Subsidiary Guarantors and non-guarantors through intercompany financing arrangements, contributions or declaration of dividends between the respective parent and its subsidiaries. While the non-guarantor subsidiaries do not guarantee the Issuer's obligations under our outstanding debt, the transfer of cash under these activities facilitates the ability of the recipient to make specified third-party payments for principal and interest on the Senior Notes, the U.S. Credit Agreements, other outstanding debt, Common Stock dividends and Common Stock repurchases.

The summarized financial information of the Obligor Group is presented below on a combined basis after the elimination of: (i) intercompany transactions among such entities and (ii) equity in earnings from and investments in the non-guarantor subsidiaries. Transactions with, and amounts due to or from, non-guarantor subsidiaries and affiliates are separately disclosed.

(unaudited)

(unaudited)

Share Capital

On July 17, 2024, we declared a quarterly cash dividend of $0.70 per share on our Common Stock amounting to $76 million. The cash dividend will be paid on August 12, 2024 to holders of record as of July 30, 2024.

There have been no material changes to our share capital described in our 2023 Form 10-K other than those disclosed above and in Note 10 - Shareholders' Equity in the accompanying unaudited interim consolidated financial statements.

Contractual Obligations

We have not entered into any material off-balance sheet arrangements.

Except as otherwise described in this report, there have been no material revisions outside the ordinary course of business to our contractual obligations as described in our 2023 Form 10-K.

Tax Return Audits

Our tax returns have been under joint audit for the years 2013 through 2015 by the United States, Netherlands and Germany (the "Authorities"). The Company and the Authorities were unable to reach an agreement jointly and therefore the audits continued on a separate jurisdictional basis. In the fourth quarter of 2022, we concluded settlement discussions with the Dutch tax authority. In the second quarter of 2024, we advanced discussions with the German tax authority related to the German transfer pricing audit and recorded immaterial adjustments to our tax reserves related to these matters. In addition, our income tax returns in Mexico are under audit for the year 2018, in Canada for the years 2016 through 2022, and in the United States for the years 2016 through 2020. In August 2023, we negotiated a partial settlement with the Mexico tax authority for its audit for the year 2018. The partial settlement did not have a material impact on income tax expense in the consolidated statements of operations for the year ended December 31, 2023. In September 2023, the Canadian tax authority opened tax audits for the years 2019 through 2022, and the audits are in the preliminary stages. The audit in the United States for the years 2016 through 2020 is in the data gathering phase. As of June 30, 2024, we believe that an adequate provision for income taxes has been made for all open tax years related to the examinations by government authorities. However, the outcome of tax audits cannot be predicted with certainty. If any issues raised by the government authorities are resolved in a manner inconsistent with our expectations or we are unsuccessful in defending our positions, we could be required to adjust our provision for income taxes in the period such resolution occurs. If required, any such adjustments could be material to the statements of operations and cash flows in the period(s) recorded. See Note 11 - Income Taxes in the accompanying unaudited interim consolidated financial statements for further information.

Business Environment

We experienced challenging demand conditions across several end-markets. We continue to closely monitor the impact of, and responses to, geopolitical effects on demand conditions and the supply chain. Demand conditions and incremental industry production capacity resulted in elevated industry competitive dynamics and continuing pricing pressure across end-markets. We expect demand challenges to persist and to pressure pricing, which effects we anticipate to be partially offset by improvement in input costs across the year.

Critical Accounting Policies and Estimates

Our unaudited interim consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated financial statements and the reported amounts of Net sales, expenses and allocated charges during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.

We describe our significant accounting policies in Note 2 - Summary of Accounting Policies, of the Notes to the Consolidated Financial Statements included in our 2023 Form 10-K. We discuss our critical accounting policies and estimates in MD&A in our 2023 Form 10-K.

Recent Accounting Pronouncements

See Note 2 - Recent Accounting Pronouncements in the accompanying unaudited interim consolidated financial statements included in this Quarterly Report for information regarding recent accounting pronouncements.

Market risk for the Company has not changed materially from the foreign exchange, interest rate and commodity risks disclosed in Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2023 Form 10-K. See also Note 12 - Derivative Financial Instruments in the accompanying unaudited interim consolidated financial statements for further discussion of our market risk management and the related impact on the Company's financial position and results of operations.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, as of June 30, 2024, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the information in this Quarterly Report, readers should carefully consider the information in Part I, Item 1A. Risk Factors of our 2023 Form 10-K.