Celanese Mexicana, S.A. De C.V. Business Information, Profile, and History

Company Perspectives:

Our enterprise's basic operational objective is to serve the client, incorporating fundamental concepts such as the constant search for continual improvement, working with clients and suppliers to fulfill and exceed the expectations of the market.

History of Celanese Mexicana, S.A. De C.V.

Celanese Mexicana, S.A. de C.V. (CelMex) is one of Mexico's major producers of chemicals and leads the country in the production of industrial chemicals such as acetic acid and vinyl acetate. The company makes and sells basic and specialized chemicals to be used in industrial, construction, pharmaceuticals, food, textiles, paints, adhesives, paper, clothing, tobacco, and other products. It is the Mexican subsidiary of the German chemicals firm Celanese AG.

Industrial Pioneer: 1944-68

During World War II Mexico was cut off from the synthetic textiles fiber that it had been purchasing from Italy and Japan. Although commercial relations with the United States had soured following the expropriation by Mexico in 1938 of foreign oil companies, the government had little choice but to turn to the United States in seeking a company to make rayon. It found such a partner in the Celanese Corp., which in 1944 became the first large U.S. company to enter Mexico since 1938. Nacional Financiera, S.A., the government development bank, and Banco Nacional de Mexico (Banamex), the nation's largest private bank, helped finance the venture. The Mexican government granted tax concessions extending for as long as ten years and promised to protect Celanese against competition from imported products in its own field. Celanese Corp. shared ownership of the new enterprise with Nacional Financiera and four groups of Mexican investors.

Celanese Mexicana started out making acetate fibers in 1945 in Ocotlán, Jalisco, and later added nylon as well. It took over the only plant in Mexico making rayon, a small facility on the fringe of Mexico City. This was phased out in favor of a new plant that began production in 1948 in Zacapu, Michoacan, as Viscosa Mexicana, S.A. In 1954 CelMex purchased a Toluca textile mill and adapted it to the manufacture of tire-cord fabric from rayon yarn sent from Zacapu. Nylon and polyester yarn were later introduced for the same purpose. A plant in Lerma, Mexico, was added in 1951 for the production of plastic materials used in wrappings and building sheets under the name Claracel, S.A. Mostly at the urging of the Mexican government, CelMex established a plant in Rio Brava, Tamaulipas, in 1952 to produce cellulose and other products from the lint and wood-pulp waste left by nearby cotton growing. This venture was named Celulosa Nacional, S.A.

A chemicals division, established in 1957, began producing basic chemicals such as acetate emulsions, formaldehyde, polyvinyl, and resins. This was spun off in 1960 as Quimico General, a separate company 40 percent owned by CelMex.

Celanese Mexicana's estimated annual sales increased from $4 million in 1947 to nearly $30 million in 1957. Its net profit rose as high as $6.7 million in 1956. By 1957 the company was making 29 products in seven plants and had 3,500 employees and assets of $51 million.

With the end of government protection against imports, however, the company was now facing competition in Mexico for the first time. As a result, it had to skip its dividend in 1958, and its tax concessions ran out the following year. A reorganization plan that included promoting Mexicans to top positions restored CelMex to health and in 1960 profits rose by 38 percent before taxes. In 1967 the company still accounted for 65 percent of all synthetic-fiber sales in Mexico. Sales reached 781 million pesos ($62.48 million) in 1967, and net profits came to 63.7 million pesos ($5.1 million). The company had 4,603 employees. The next year CelMex moved its headquarters from downtown Mexico City to the elegant San Angel neighborhood.

Commitment to Chemicals: 1975-88

Celanese Mexicana, in 1975, was 18th among Mexican enterprises that reported their annual sales level, with revenue that year of 3.01 billion pesos (about $348 million). That year it opened a new polyester filament plant in Querétaro and began production of acrylic esters at Casoleacaque, Veracruz. It also acquired a majority stake in Novacel, S.A. de C.V., a converter of packaging film. These additions brought the number of its production facilities to ten. CelMex remained, in 1976, the largest producer of synthetic fibers in Mexico and one of the most important in the manufacture of chemicals and plastics. Four years later it had 9,153 employees, net sales of 10.89 billion pesos ($475 million), and net income of 1.02 billion pesos ($45 million).

The devaluation of the peso in 1982 was a blow for all Mexican companies that had borrowed money abroad. During the following year Celanese Mexicana renegotiated almost all its long-term debt of $329 million with the aid of foreign credits and government help. The company also closed the Zacapu factory and a textile plant in Guadalajara, thereby reducing its payroll of 8,200 workers.

Celanese Mexicana still remained Mexico's largest producer of manmade fibers. In 1982 it completed work on a petrochemicals complex at La Cangrejera, Veracruz, supplied by Petróleos Mexicanos, S.A. (Pemex), the federal government's giant oil and gas monopoly. This enabled CelMex to become Mexico's largest producer of secondary chemicals, and it continued to hold 40 percent of the nation's synthetic fibers market. The company's sales increased to more than $850 million in 1983, and its profit reached $35 million. Exports accounted for 32 percent of output at CelMex's ten plants, with 33 products exported to 38 countries. CelMex even gained an advantage from the collapse of the peso: about one-quarter of Mexico's textiles had been coming from smuggled foreign goods, but most of the trade was made for dollars, and the recession meant no one had dollars to pay for these illicit goods. The recession also hurt the company, however, by lowering demand for such goods as tire cord and carpeting.

In all, some 70 products were being made by three divisions. The fibers division was producing synthetic materials such as acetates, rayon, nylon, polyester, and cellulose and acrylic materials for textiles, rugs, and diverse products and, at this time, held 36 percent of the national market for these products. The chemicals division was turning out vinyl acetate, industrial alcohols, solvents, and intermediate products for such industries as plastics, abrasives, food, pharmaceuticals, and paints. The plastics and specialties division was manufacturing flexible films for packaging materials, engineering resins, and cellulose.

By this time Celanese Mexicana was a major exporter, with sales outside Mexico representing 37 percent of its production by volume and 20 percent in terms of revenue. These goods were being shipped to the United States and Canada, Western Europe, North Africa, China and Hong Kong, and, in South America, to Argentina, Brazil, and Venezuela. Net sales came to 102.81 billion pesos (perhaps $762 million). CelMex now ranked 14th among reporting companies.

A German Subsidiary: 1987-2001

Celanese Corp. became Hoechst Celanese AG in 1987, when the U.S.-based corporation was acquired by the German pharmaceuticals manufacturer Hoechst. Celanese Mexicana was restructured the following year into two groups: Fibers, Resins and Imports, and Chemical Products and Packaging Materials. Net sales came to 1.59 trillion pesos ($694.32 million) in 1988, and net income was 185.76 billion pesos ($81.12 million). There were 8,661 employees. The company spent about $600 million between 1989 and 1994 to expand and modernize its facilities. In 1990, when sales reached about $750 million, exports came to some 20 percent of the total, with the United States, Canada, and Europe leading the way, followed by South America, the Caribbean, and Central America. Marketing to customers abroad was assigned to a subsidiary based in Dallas. CelMex was the leading Mexican producer of intermediate petrochemicals, PET (polyethylene terephthalate), and synthetic fibers. Investments were made to expand production of polyester and polyester thread, vinyl acetate, 2-ethyl hexanol, polypropylene film, and acrylic acid.

With the advent of the North American Free Trade Agreement (NAFTA) in 1994, Hoechst Celanese increased its 49 percent holding in Celanese Mexicana to a majority stake. CelMex now had revenues of $1 billion a year and was the largest privately owned chemicals firm in Latin America, but its earnings were falling because of rising costs and increasing competition. Sales had decreased by 6 percent in 1993, for example, and profits had fallen by 32 percent. Restructuring of operations included withdrawal of uncompetitive products such as cellophane. CelMex's output at this time included polyester and nylon fibers, oxo alcohols, acetyls, esters, and plasticizers, as well as packaging products that included mainly PET for plastic soft drink bottles.

Celanese Mexicana now began exiting noncore businesses to focus on its main polyester fiber and resin, acetyls, and oxo-alcohols operations. It began slimming down in early 1995 when it sold its Toluca thermoset-resins plant, which produced coated resins and unsaturated polyesters, to a Mexican subsidiary of U.S.-based Reichhold Chemicals Inc. Later in the year it sold its nylon plant in Ocotlán to Alpek, S.A. de C.V., the petrochemical business of Grupo Industrial Alfa, one of Mexico's biggest companies. CelMex also sold its stake in a caprolactam plant in Salamanca to Alpek. This facility previously had been a joint venture with Alfa. In 1997, however, it restarted its phthalic anhydride plant in Lerma, which had been shut since 1994, and it opened a polypropylene plant in Zacapu and a PET plant in Querétaro.

Edward Munoz, born and raised in Texas, took the helm of the company in late 1994. A year later he told Claudia Olguín of the Mexican business magazine Expansión that he had found the company to be "very dysfunctional. The manufacturing plants were run without input from marketing programs. The plant directors acted independently. ... We needed to do things differently." A managerial shakeup included new unit directors who would receive incentive payments tied to the productivity of their respective areas. CelMex had 49 plants grouped into eight industrial complexes in 1994.

Hoechst owned 51 percent of Celanese Mexicana in 1998, when it bought the other shares of stock from two leading Mexican entrepreneurs--Isaac Saba Raffoul, who owned 30 percent, and Carlos Slim Helu, who held 17 percent--plus the remaining 2 percent being traded on Mexico City's stock exchange. CelMex's fiber division, which encompassed its production of polyester and its PET resins, was then sold to Saba and to the U.S. firm Koch Industries Inc. The chemical division, which consisted of acids, solvents, films, and plasticizers, became a subsidiary of Celanese AG, a new publicly held company spun off by Hoechst in 1999. Of CelMex's sales of 9.62 billion pesos (about $1.2 billion) in 1997, the fibers division had accounted for about 65 percent and the chemicals division the remaining 35 percent.

Now reduced in size, Celanese Mexicana had sales of about $550 million in 1998, with exports accounting for 45 percent. Some 56 products were being sold in 27 countries. Of the total, basic chemicals accounted for 67 percent; acetates, 21 percent; propylene films, 9 percent; and specialty chemicals, 3 percent. Employment had dropped to about 2,200.

In 2000 Celanese Mexicana had more than 110 clients in 30 countries. It was producing about 540,000 tons of chemical products each year. Exports came to 49 percent of total production. CelMex was producing acetates at Ocotlán and polypropylene films at Zacapu. The Congrejera complex was producing acetic anhydride, acetone derivatives, acrylic acid, ethyl acetate, methyl acrylate, methyl amines, and vinyl acetate monomer. CelMex ranked fourth in Mexico in the production of basic petrochemicals. Sales came to 4.15 billion pesos ($444.5 million) in 2001.

Principal Competitors: Alpek, S.A. de C.V.; Petróleos Mexicanos, S.A.; Polioles, S.A. de C.V.

Chronology

• Key Dates:
• 1945: Celanese Mexicana opens its first plant, for making acetate fibers.
• 1957: The company has seven plants making 29 products and employing 3,500 workers.
• 1967: Celanese Mexicana is producing 65 percent of all synthetic fibers in Mexico.
• 1976: Ten plants are producing chemicals and plastics as well as synthetic fibers.
• 1982: A new petrochemicals complex makes the firm Mexico's leader in secondary chemicals.
• 1988: The company is restructured under its new German owner, Hoechst Celanese AG.
• 1998: The fibers division is sold, while the chemicals division becomes a wholly owned subsidiary of Celanese AG, a new company spun off by Hoechst.