Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Celanese Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jon Puckett. Sir, you may begin.

Thank you, Shannon. Welcome to the Celanese Corporation first quarter 2014 conference call. My name is Jon Puckett, Vice President of Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer; and Steven Sterin, Senior Vice President and Chief Financial Officer. The Celanese Corporation first quarter 2014 earnings release was distributed via Business Wire on April 21, 2014 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, www.celanese.com, 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 will begin with introductory comments from Mark Rohr and then we will field your questions. I'd now like to turn the call over to Mark.

Thanks, Jon, and good morning everyone. We appreciate you joining the call today. Our prepared remarks were released with earnings, so I'll keep my comments brief and then open the line for your questions. For the quarter, we reported adjusted earnings of $1.33 per share; which is a record first quarter and one of the top earnings quarters in our history. Sales increased 6% year-over-year and 5.5% sequentially on 3% higher volumes for both periods. Segment income margin increased 260 basis points sequentially and 100 basis points year-over-year to 17.7%. We generated operating cash flow of $164 million, deployed $53 million of cash this quarter to repurchase about 1 million shares, and end the quarter with about $1 billion of cash on the balance sheet, well-positioned to pursue our growth initiatives and maintain our capital deployment strategy. Every business performed at a very high level, expanding margins both sequentially and year-over-year, driven by strong execution, innovative products, and productivity. In Engineered Materials, we introduced new products and applications that met customer needs, driving strong volume growth in auto and medical segments. In Consumer Specialties, a number of initiatives came through helping us lower operating cost and improve operational reliability. In Industrial Specialties, our proprietary technology drove strong demand in Europe and Asia. And in Acetyl Intermediates, the strategic actions taken last year resulted in lower operating cost, while day-to-day execution drove margin improvement. While we are off to a great start for the year, we still have a lot of work ahead of us to deliver on our commitments. For instance, in the second quarter, we have a major turnaround going on at Clear Lake, the largest Acetyls unit in the world. In our cellulose derivatives business, we expect slightly lower earnings due to the timing, impact of our production schedule as we prepare for outages later this year. These two items alone represent headwinds of about $20 million sequentially. But despite hurdles like those mentioned, our ability to execute against our strategy provides line of sight to earnings growth of 12% to 14% for 2014. With that I will now turn it over to Jon for Q&A.

Thanks, Mark. In order to get through everybody's question we ask that you limit it to one question and one follow-up and with that Shannon I will turn it over to you for the Q&A instruction.

Thank you. (Operator Instructions). Our first question comes from the line of David Begleiter of Deutsche Bank. You may begin.

Hey Mark, could you quantify the benefit from VAM in Q1 in terms of how much spot you sold and the likely benefit in Q2 from this spike in VAM prices?

Well, I would like to not break it down just by specific product, but we did see as you know, David, we saw with a number of unscheduled attitudes as well some structural changes happened last year we saw some tightness in the VAM market manifest itself as we ended the quarter. Net-net we had pricing up offset by raw materials probably to the tune of $20 million or something that rolled through relative to quarter.

Very good. And just Mark, just on China. Can you talk about acetic acid pricing as well as the profitability of your acid unit in Nanjing?

No, I won't talk about specifically, but what I will say is that acid remains, we're stable in China, we've seen some margin increase over the last several quarters; we are trending up in margins in China. Our kind of view is that we should have volume growth, the margin grow slower through the year based on what we're seeing over there.

Thanks, David. Shannon, let's move to the next question.

Our next question is from Duffy Fischer of Barclays. You may begin.

Mark, I was wondering -- you've talked a little bit about changing strategy and pricing and I think pricing across AI in particular has been better than we would have forecast each of the last two quarters. Can you talk about that new level of either profitability or pricing that you've been able to get structurally changing the way you write your contracts?

Yes, Duffy. So I think most folks on the call know that if you look back historically we have been a company that in the AI chain was largely fully contracted. And the contract pricing we are all formally driven with a lot of restrictions on -- self-imposed restrictions on how rapidly we can move pricing based on the circumstance that we face. And we look at that in 2012 and really concluded that did not give us the degrees (inaudible) make the kind of decisions you need to make the drive value. And so we started rewriting those contracts and moving away from indexes. We're not completed with that in some businesses we're probably two-thirds of the way they are, in other businesses we're more like half the way they are, Duffy. So what we are doing is we are just putting ourselves to make a conscious decision everyday on how we price these products and so that's what we're doing. We run it day to day to day and because we've been able to make good business commercial decisions and we've seen hyperinflation rolled through and have been able to capture that and be victimized by that and equally when we see opportunities to push in -- into new markets in the areas we're able to respond very quickly to that.

Great. And then it just on the Clear Lake turn around, it is a relatively new unit, kind of the one that got punctured or whatever four or five years ago. Would you be able to expand the capacity in that unit in this turnaround?

Not directly. Duffy, well that unit is now -- that's the last expansion we did the largest acetyl chain in the world. And what we're doing though is we're expecting to be able to run longer between turnarounds because of the some of the steps we're taking. So incrementally we will instead of going down every other year we will make sure we try to go down every third to fourth year.

Perfect. Thank you.

That will give us some capacity.

Okay. Thanks, Duffy. Shannon, let's move on to the next.

Our next question is from the line of John McNulty with Credit Suisse.

So with regard to the consumer business, clearly it enjoyed a lot of lift and you gave some -- or you put out some statements regarding there were a number of kind of initiatives that were finally starting to kick in. Can you walk us through kind of what some of the major initiatives were that really moved the needle because it clearly was a pretty big pick up there?

Hi, John, it's Steven. First of all if you look at the top-line in terms of what's common there, we talked about our ability to continue to add value in this space and recognize higher pricing in our tow business. You will see that this was offset by the step-down in a contract like arrangement. So you've seen growth coming from the top-line. In terms of the productivity we've also been able to do some things with our raw material usages and approaches there that have yielded us some meaningful productivity. And finally we had talked to you before about building a natural gas pipeline down in Mexico to give us off of crude base derivative for our energy and steam. We've completed that project as well. So when you look at those in combination a really strong performance. I would note that in Q1 if you look at Q1 versus the outgoing quarters I think we did about 128 or so in the first quarter I would expect that to be more in the 150 to 120 range as we move out. We're going to have a turnaround in one of our major units and also you have the corresponding build to draw inventory associated with that. But that's in that $15 million to $20 million headwind that Mark talked about.

And then just as the follow-up. I know there has been some excess capacity put in place on the cellulosic fiber side. Have you seen the benefit of that on the raw materials yet? Is that part of some of the benefits that you have started to see yet or is that something still going to come for you?

If you look at the headline prices for cellulosic, it is down which is probably an industry wide impact. So yes there is some benefit from that that is out there but that's not a large part of what I just talked about.

And that's specific to the raws as well.

Right.

Right, yes.

Thanks, John. Let's move to next question Shannon.

Our next question is from P.J. Juvekar of Citi. You may begin.

Mark, the European recovery should be benefiting the AEM business. So can you just talk about geographically what are the margins in Europe? How much did they improve? And how would they compare sort of to North America?

Yes, in that business the margins are virtually identical on either side of the Atlantic, P.J. There is no -- I mean there is certainly differences in one product and in one application broadly speaking, they are about the same. What we are seeing in Europe is pretty strong. Auto build activity over there, I think year-over-year we are up 4.7% globally. In Europe it's about 4.6% of that or so with Germany about 7%, if my memory serves me. So we've seen a really strong pull there and we continue to expand the applications of our product. So we're seeing some real strong uptick in volume per vehicle and that's really pushing a lot of or pulling a lot of material for us. But we're also seeing in areas like medical do quite well, some industrial applications that have been a bit weaker, starting to pick up again. So generally Europe is doing much better P.J. than it was this time last year and now. And I think you would have seen us have a pretty good year there.

And secondly on methanol, your first plant is being built with a joint venture partner, now you are working on a second plant. So why bring the joint venture partner on the first plant, why not just build it yourself? Thank you.

Yes, JV I think -- these things are sequential, so we needed to get started in a hurry. And there was a limit to how committed we wanted to be to one single project, for methanol and so we did that and we got started with that project. And you saw the amount of time it took for us to get the permit complete, which has put us a bit in a bind as we try to get this operational next year. At the time we looked also at Bishop and Bishop was certainly very doable roughly the same economics. But it represented some different challenges for us that we wanted some time to sort through. And we sorted through those challenges, so we're now starting the permit process there. I think our construction of that project is going to be dependent on our attracting a suitable partner or partners to let us end up in balance on methanol consumption versus demand.

Thanks, P.J. Shannon, let's move on to the next question.

Our next question is from Frank Mitsch of Wells Fargo. You may begin.

Hi, this is actually Maggie on for Frank.

Hi, Maggie.

Hi. So in consumer specialties you had mentioned that the higher pricing in tow was offset by the legacy contract in flake. So would you be able to size that offset and how long will this contract last for?

That contract goes to 2017. I think through 2017 and the pricing is not constant. So it's a bit tougher on this year than it will be in the outline years Maggie and I prefer not doing actual the numerical offset there but net-net I think we're up few percent on prices that is reflected in the numbers.

And then Celanese has a pretty healthy balance sheet and you've been spending a lot in terms of internal growth projects. What are your thoughts on M&A at this time?

Well, we're working as hard Maggie, it's hard to buy things these days, but your prices are very high and people tend to be reluctant to sell the kind of properties they we want to buy, but nonetheless we are working very hard on that. We have been building out our M&A team and I'm real pleased with that group now. So what I will just say is stay tuned, we're going to work hard to try to find some good properties to add to our portfolio, but anything we do there Maggie will make sense to you guys.

Thanks, Maggie. Shannon, let's move to the next question.

Our next question is from Kevin McCarthy of Bank of America-Merrill Lynch. You may begin.

Well, what I was referring to Alex is if you look back over the last decade that business hasn't really contributed a meaningful way to the acetyl chain for anybody associated with it. And we were sitting and I'll quote a number that's directionally right with capacity utilization of 60-some-percent arena. So we're very low and we in turn had a couple of sites in Europe that were stranded assets excellent people great sites but a lot of regard but in a situation where logistically I think from a size point of view they just couldn't -- they just couldn't make any money. So we took steps to sell and then ended up shutting down we see on Tarragona. At the same time any shutdown of a cracker, I mean a VAM plant out in the UK. The net effect of that probably was a 5% or 6%; I'm looking at my colleagues' capacity elimination right. So in theory you haven't really changed the dynamics very much in a world market. But what it did is it took what was a pretty sloppy Europe and made Europe pretty tight. So Europe is now a net importer of VAM. U.S. is pretty tight we've seen some demand growth in U.S., we've seen demand growth in Europe and in Asia. So we got into a trade imbalance challenge that is driven pricing short-term. It will some period of time for that to work itself out. My gut feel though is that we're seeing margins in that business like we're seeing margins in AI in general slowly expend and get to a healthier level. So I wouldn't expect that business to be the best business is in our portfolio any time soon but I think it's going to a better business for us as we go out through this year and into next year than it has been historically.

Thank you very much. And then moving to AEM, the volumes were up 14%, do you think this kind of growth is sustainable on a year-over-year basis or may be this quarter was particularly good for whatever reason?

Yes, if you look at Engineered Materials we've got strong sales increase, strong volume increase that 13%, 14% kind of percent. A lot of it has been driven by -- although we are -- the own goal we have internally is to sell 2X kind of the growth in that business and we've been able to do that. So when you look at we're expecting year-over-year auto builds to be may be 3%, 2.8% or something for the full year forecasted growth. That would say we need to grow 6% or 7% or 8% that's kind of the numbers that we kind of target. When you get beyond although the new applications we're introducing are starting to have traction. And it is always a point of caution Alex, to introduce new things because we will expect big revenue on day one and you just don't get that. But when you go out and demonstrate new way to support and insulate high voltage power lines and have 10 kilometer high-voltage line in place. And in South Texas, you start making a difference. And so we're excited about our ability to grow this business and we think it should be a multiple GDP kind of growth business.

Thanks, Alex. Shannon, let's move on to the next question.

Our next question is from Robert Koort of Goldman Sachs. You may begin.

Mark, I was wondering if you could talk about what the hurdles are as you bring up the Clear Lake methanol plant. You mentioned a third quarter 2015 start up, but trying to accelerate it. What are going to be the biggest roadblocks to getting that done faster?

Hi, Bob, we're just doing a lot of work in a short period of time. If you look at the chart, we sort of gave you see how steep that project completion start is. We have a number of months. I think five months we have for about 10% completion on average across these five months. Those will spend the end of this year and early next year, so October through to like February kind of timeframe, which is also a bad time of the year. Bob, so we can be very susceptible to weather and events kind of out of our control. So we're trying to just start really strong. We're actually doubling shifts down there now as we speak to try to start making some inroads on the schedule early in the year to give us a little bit (inaudible) later on. We need to do that to have a chance of pulling this thing back. But right now, I think the schedule we put out there, which is the September/October kind of timeline is fully consistent with the numbers that we gave last quarter in terms of the range and the kind of headwinds we face. And we're just going to do all we can to pull it up and we will keep you posted on our success with that.

And if I might ask a couple of raw material questions. One of your fellow methanol producers struck a natural gas contract, which appears to be based on a shared margin arrangement. Is there any chance you could do that at either Clear Lake or Bishop? And then also in the U.S. you guys used to have a favorable ethylene contract. Is that still there? And when might it expire if it is?

Yes, most of our ethylene and much of which ethylene contracts -- most of our ethylene contracts roll off in '15. And we are starting some early negotiations on a few of those, so I'm not sure exactly which one you're talking with -- you're talking about now.

May be thinking back to a contract we had in the mid-2005 that had a kind of virtual cracker type arrangements into it. Those -- that contract got wiped out in an industry bankruptcy so that -- we don't have that type of contracts any more. So I think the contracts Mark is talking about would be -- really kind of continuous market rollover type contracts we will be negotiating.

So as it relates to the net gas and we've looked at what Methanex did and I think that made sense to that and we don't think that kind of contract relation will make sense to us. One of the interesting things about the gas market now is futures markets don't move very much even though with the tightness of increased consumption after this winter. So we're exploring options to buy forward some gas to run that unit. And as we get into looking at doing that, if we do that we will certainly make sure that with you guys going forward.

And, Mark, I know you would rather not talk about acetic and methanol. So let me ask you an AEM question. You guys, I would assume, have pretty long lead times in developmental work. From where you stand is the electric car revolution really going to occur? Are you doing a lot of work on those kind of applications beyond just sort of the standard light weighting that has been going on to make CAFE standards? Is there more in the pipeline that we don't see from the outside?

Well, yes Bob it just a bit -- I don't know if I'm -- one of the forecast was working on board. I tell you is that light weighting is a precursor, prerequisite for that to happen and the amount of energy left in light weighting is just staggering, it's things beyond the conventional use of thermoplastic to thermostats. We are seeing a lot of work on electronics phase to sort of eliminate dashboards and things like that and go to these normal to flat panel display for our vehicles. So you can start to imagine ways that you can get the weight, weight way down these vehicles and that makes the -- some of lithium ion technology really viable for electric cars to work. So my gut is that it's going to be -- it's a little bit like the energy business. There's going to be lot of different solutions. But what we're going to play there a lot is going to be in the light weighting, strengthening and thermoplastics are just killer in that regard because they are relatively inexpensive versus acetic carbon and it provides virtually the same characteristics.

Thanks, Bob. Shannon, let's move to the next question.

Our next question is from Laurence Alexander of Jefferies. You may begin.

I guess two longer-term questions. First, on the Consumer Specialties segment, as you think about the longer-term trend for acetate tow demand to be able to sustain your kind of earnings CAGR longer-term do you need to start to see competitor shutting down capacity or do you expect demand to keep growing through the end of the decade?

No, I don't think there is, I think the industry is kind of perspective on demand, is that we're pretty close to the top on demand and demand is going to start sliding down. I think I've told you, I don't think that really matters as long as the industry kind of makes rationale decisions with regard to the capacity. We certainly have taken steps to shut down and idle and our -- our ineffective units and in case we're doing that we actually gave out volume. So I think we saw a way to do that it made economic sense for us. I'll be kind of shocked if others independently don't have the same kind of opportunities in front of them.

And then secondly on the light weighting side, do you think there will be a point where the benefit for Celanese flattens out in the sense that as things move towards virtual dashboards, and so on, you just end up taking out more pieces of the car and that offsets the incremental light weighting opportunity for you?

Well, yes. It's just not absolute. The -- we're only from a penetration point of view even though we had a good uptick this quarter we're still a few kilograms per vehicle in the world and we see a range and they are from 0 to 8, 9, or 10. So, I think -- I think there is still so much upside there it's hard for me to see Laurence a near-term follow-up to that and what we're finding is that the desire to continue to substitute is really great, so just like steel is facing aluminum and aluminum is facing carbon. They're also facing thermoplastics like I commented on and there's just a lot of run there.

Thanks, Laurence. Shannon, let's move to the next.

Our next question is from Vincent Andrews of Morgan Stanley. You may begin.

It sounds like from the release that you've got 80% of your cost all set there at Clear Lake, but on the Bishop facility how confident are you in the CapEx number you put out there just given all the inflation that others are seeing and that you are kind of had a bunch of other projects in that area or just in general ahead of you?

I think that's a big question on Bishop. If you look at the design and the basis on a relative basis it is virtually the same stock cost if you think will have at Clear Lake. Having said that you come up building this thing at a time when everybody and their brother is building a chemical plant on U.S. Gulf Coast. So there is going to be inflation and to be honest we haven't really quantified that yet. The good news about the permitting process is that we have a little bit of time to do that as we work with partners and the permitting will not be finished with this actually until our other plant is up and running. So I think we will have a good chance of nailing that -- nailing that cost and being very transparent with that at the time.

And as a follow-up, is it a reasonable assumption on our end that sort of the move to JV at Clear Lake and now maybe to do Bishop as a JV as well or just to do it at all is because you have freed up capital that should -- you sort of at one point I thought was going to go towards TCX and now that that's not moving as fast as you thought, you are just reallocating it?

No, I look at a bit differently. I think we're quite confident in our ability to build these demand and we're quite confident in the long-term competitive position in natural gas in U.S. So we think U.S. based methanol is going to be one of the most cost effective methnols in the world, certainly in developed world, it will be the most cost effective. We have a sink for a million tons and we've satisfied about two-thirds of that, a little more than two-thirds of that. And so we're exploring is can we satisfy the other third, which would represent economic advantage to us in our Engineered Materials business. So no, I think I would look at that way. I think it's just we gain confidence. We feel good about our cash flow going forward and we're willing to put it out there. But I want to emphasize we will need a partner; we have no interest in building the plant by ourselves.

Okay. Thanks very much.

Thanks, Vincent. Let's move to the next Shannon.

Vincent.

Hang on.

You know you had a question embedded in there about TCX as well and let me give you just a quick update on where we're with that.

Well, you want to say a couple of things.

Yes, I think in Indonesia we're making nice progress there in terms of identifying land, we see a partial land we're interested in and the process is moving forward, but it's going to take a little bit more time, but we're making on more progress there. In China, we are in the days now we're actually engine testing and with our product and moving forward on that. So those are kind of the securities update from our last call.

Okay. Shannon, let's move to the next question.

Our next question is from Hassan Ahmed of Alembic Global. You may begin.

Decent margin expansion on the AI side of things in the quarter. Just trying to get a sense -- obviously it was a bit of a noisy quarter in terms of outages and higher methanol prices and the like. Obviously since then, methanol prices have rolled over. Just trying to get a sense that -- are these sort of Q1 margin levels in AI sustainable over the next couple of quarters?

Yes, I think so. I mean there will be ups and downs. We are most concerned about the outages in Clear Lake because not only are we going down for a long period of time, but our some of our supplies of raw materials are going down. So we have kind of baked in a fairly low operating utilization for this quarter there and that could have been impact, if, I think it will be okay but it's one of our suppliers does not get back upon time.

Fair enough.

I think what you're seeing is, you see in the industry slowly, I won't say reset, and Lord knows these margins are moving out dramatically, but we're seeing margins kind of move towards the point of greater sustainability. I think there is an interest -- there is an interest for that to happen. What I see in the world is people just making a little better decision.

Now a follow-up on the methanol side of things. Just curious about your views of the market near to medium term. A fair bit of capacity coming online be it Methanex or CIP. You obviously mentioned that you are very sort of confident and comfortable with the cost position within the U.S. But just in terms of supply/demand fundamentals over the next couple of years with all of this capacity coming online, are you in the camp that you expect call it effective utilization rates to remain tight for the next couple of years?

Well I think it's others business to comment on the better than I can, but what I'll say is that we think we've seen prices fall down, pull back in China and move back to a more reasonable range in the $400 kind of range, I would expect that at some point the prices in the U.S. will move off where they are today in fact back closer to $500 or so. And my kind of gut is that's a place that it's going to be haunt for a while and then we will bring on some existing plants and we'll see what happens, but I think for the next couple of years methanol is pretty close to where it's going to be.

And essentially you are saying that most of this new capacity that is expected to come online, demand is strong enough to digest this incremental supply?

I think so, yes.

Thanks, Hassan. Shannon, let's do the next question.

And our next question is from James Sheehan of SunTrust. You may begin.

Hi, Mark. What makes you comfortable that you can offset the negative impact of shifting towards internally produced methanol in late 2015?

Well you don't get a chance to interact with team I have here every day. If you did we'd do it. We were looking at it every day and we're just stacking up the things that we need to do to offset it. And later this year we will share those things with you. And so it's not really -- we're too early in this year to worry about to be honest but or I'd share more. But we have -- I have confidence; just that we have confidence that we will find a way to offset that. And that's our objective and Steven Sterin's office furniture is for sale right now. So whatever excites.

Also on emulsion polymers, you noted that there were some beneficial effects in Europe and part of that may have been driven by the weather. I'm just wondering if you can comment on the sustainability on strength you're seeing in that business?

Yes, Europe is all paints and curly and that business is strong. I think it's a good news this year and you recall that the weather was a welcome surprise for us early in the year. We had a pretty wet start to 2013; it's a bit slow this year. Weather was much nicer and people jumped projects early. We don't see it winding. Actually there's a lot of construction underway in Europe if you get out and about there you'll see it gives you pretty good confidence that we're going to see Europe remain strong. I'd say the same thing for Asia. And that business has been very strong and we don't see any signs that's letting up, but we're less confident of is the U.S., which is not train wreck or anything, but it's just kind of muddling along.

Okay, thanks, Jim. Let's move, Shannon, to the next question and we'll have Nils be the final set of question.

Our final question is from Nils Wallin of CLSA. You may begin.

Back on the Bishop plant since it is going to be similar scale as Clear Lake, but Clear Lake will account for about two-thirds of your current methanol needs. Does this mean that there's going to be a different JV structure or will you -- are you planning to actually grow into that methanol capacity in terms of downstream derivative growth?

No, we would like to differentiate the structure. We'd like to be a minority consumer as a structure. And do we need more growth? We could have more growth there and stuff but I wouldn't build an ethanol plant to satisfy. So I think you should expect this to be a minority investment.

And just back on industrial ethanol in China, obviously for a while it disconnected with the fuel ethanol and that kind of prevented the retrofit from having any meaningful earnings contribution. Has anything changed on the industrial ethanol pricing and there is any opportunity for Nanjing retrofit to start adding to earnings?

No, I wish I could say there was. Right now that the industrial and you saw the market for ethanol remains quite weak in China. We're occasionally moving some material offshore getting a bit higher net back on that. But it's helping to see our way clear for that unit to be a material contributor certainly this year.

Thanks Nils and thanks everybody else for your time and interest in Celanese. We will be around later today for calls.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.