Alexandra Engler pitches Celanese at Sohn 2025

Summary

• Alexandra Engler of Aren Capital pitches Celanese long at Sohn, calling it worth “$79 a share or over 50% higher than current trading levels.” The stock is off 63% since September 2024 after a guidance cut, dividend cut, and negative fourth-quarter results; Aren has liked it since mid-April and, though it’s up 30% since then, argues “we don’t believe our thesis is in the stock price currently.”
• The core call: Acetyls, half the company, faces “a structural rise in profits” from higher methanol input prices that “many are not yet paying attention to.” Structural supply outages — notably Iranian plants offline in winter to prioritize residential heating — remove 5–6% of worldwide methanol capacity, and the deficit outside the Americas increases 35% to over 12 million metric tons over three years, driving Americas utilization to a forecast 95% by 2028.
• Celanese sits at the far left of the global acetic acid cost curve: it controls 63% of U.S. capacity (top three control 90%), produces 44% of the methanol used in acetic acid production, and enjoys an almost 50% cost advantage versus methanol buyers and Chinese producers. Commodities 101: variable input costs set marginal cost, which sets price — so rising methanol costs should support higher acetic acid prices once capacity stabilizes.
• The puzzle — why acetic acid prices stayed flat this past year despite spiking methanol — resolves via capacity: Celanese’s own low-cost Clear Lake expansion plus increased Chinese capacity. With U.S. additions “now behind us,” Engler forecasts U.S. acetic acid prices up 30% by 2028, driving Acetyls EBITDA up 50% from 2024 levels and EBITDA 25% above 2028 Street numbers.
• Engineered Materials — the segment that missed its ~$2B post-synergy EBITDA target, running at about ~$1.3B — is “more of a black box,” but Engler believes the decline is “largely at an end.” Revenue per car appears to have bottomed, and analysis of bankrupt nylon competitor Ascend leads her to believe “there are little earnings left to lose” in Nylon 66.
• Valuation asymmetry: an $18B EV company with a $5.5B market cap, $2B EBITDA, and $800M levered FCF even under pressure — “creating the company at 27% levered free cash flow today,” with cash flow yields “north of 20% starting in 2027.” Additional levers include JV/equity-interest monetization already underway; Methanex is flagged as another way to play the methanol theme.

Deep dive

1. An idiosyncratic dislocation: down 63%, thesis not yet priced

• Engler’s setup: Aren hunts “idiosyncratic dislocations” and secular disruptions, and Celanese is the specimen — off 63% since September 2024 after continual earnings misses post its transformative end-2022 acquisition, a guidance and dividend cut after Q3, and negative fourth-quarter results.
• Her contention: the negative revision stream “is close to an end,” and the market’s fixation on Engineered Materials “has obscured real positives coming down the pike for the Acetyls business.” Up 30% since mid-April, but “there is still meaningful upside.”

2. Methanol: the structural supply shock nobody’s watching

• The mechanism: Celanese is the world’s low-cost acetic acid producer — cheap U.S. natural gas, proprietary technology, production of 44% of the methanol used in acetic acid production, a ~50% cost advantage, and 63% of concentrated U.S. capacity — making methanol a substantial, highly volatile input whose cost helps set marginal cost and commodity prices.
• Methanol has spiked on outages; some temporary (U.S. and Norway plants), but structural elements — Iranian plants offline each winter for residential heating — take away 5–6% of world capacity going forward. The deficit outside the Americas increases 35% to over 12 million metric tons in three years, pushing Americas utilization to a forecast 95% by 2028. Hedge kept as hedged: prices “might decrease over the next few months” as operational issues resolve, but the multi-year supply-demand mismatch sustains the rise.

3. Why acetic acid hasn’t followed — and why it now will

• The flat green line: methanol historically translates into acetic acid pricing, but this year capacity additions — Celanese’s own low-cost Clear Lake expansion plus increased Chinese capacity — pushed prices back down.
• With U.S. additions behind, Engler forecasts U.S. acetic acid prices +30% by 2028 and Acetyls EBITDA +50% versus 2024 — the source of her 25%-above-Street 2028 numbers.

4. Engineered Materials troughs; the math to $79

• The problem child: the acquisition was to yield ~$2B post-synergy segment EBITDA; it is running at about ~$1.3B. Half of its output goes to autos, and the segment is “more of a black box” — but revenue per car seems to have bottomed, and analysis of bankrupt nylon competitor Ascend leads Engler to believe there are little earnings left to lose in Nylon 66.
• The creation math: $5.5B market cap on an $18B EV, $2B EBITDA, and $800M levered FCF while earnings are depressed — 27% levered FCF today, >20% cash flow yields from 2027, plus JV and equity-interest monetizations. Target: $79, over 50% upside; Methanex named as another way to play the methanol theme.