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Earnings Release
YoY Sales Soar to US$ 3 billion in First 6 Months of 2011 Net Profit for first 6 months up 306%
Aug 11, 2011
Bangkok, Thailand - 11 August 2011 - Indorama Ventures Public Company Limited, the world's leading vertically integrated Polyester Value Chain producer, has seen revenues and profits in the first 6 months of 2011 rise strongly over the first 6 months of 2010 due to global demand for all business lines continuing to grow. Sales revenue for the first six months climbed 105% to US$ 3,019 million from US$ 1,469 million in the same period last year.
Sales in Q2/2011 grew to US$ 1,692 million, outstripping the US$ 1,328 million achieved in Q1/2011 by 27% and far outperforming the US$ 737 million in Q2/2010 by 130% due to the extra capacity from acquisitions in 2011 and a corresponding rise in sales.
"Our presence in Europe and North America has benefited the business in contrast to what the market was telling us," said Mr. Aloke Lohia, Group CEO of Indorama Ventures PCL. "The current economic slow down in the West did not impact sales and spreads because our business is part of the non-discretionary economy. With greater consolidation of both markets today, we are seeing less volatility and better spreads. We have also enjoyed the advantages of market leadership and increased customer access with our global brands."
The Core EBITDA, that is, excluding inventory gains and losses, was US$ 339 million in 6M/2011, higher than the US$ 176 million made in 6M/2010, a growth of 93%. The Core EBITDA, was US$ 181 million in Q2/2011, higher than the US$ 157 million made in Q1/2011 and much higher than the US$ 94 million made in Q2/2010. The Q2/2011 Core EBITDA increased due to higher volumes but slightly lower margins. The Company's increase in year-on-year performance for the second quarter was a result of the continued corporate growth strategy, with strategic acquisitions in Europe and North America providing stronger margins and the addition of high value added specialty products from acquisition of assets.
Reported Net Profit, including extraordinary items, rose to US$441 million, up 306% over the US$109 million seen in the first 6 months of 2010, while Core Net Profit for the first six months of this year was US$ 238 million, 160% higher than the US$ 91 million achieved in 6M/2010. At the same time our Core profit before tax and minorities excludes extraordinary gains made from negative goodwill and inventory gain/loss of US$ 234 million and US$ 108 million in H1/2011 and H1/2010 respectively. In Q2, 2011, Core Profit before tax and minorities was US$ 122 million, which is 107% above the US$ 59 million made in Q2, 2010 and 10% above the US$ 111 million made in Q1, 2011.
Mr. Lohia said, "We have benefited from our geographical diversification as Western spreads outperformed Asian spreads and the market rationalization achieved over the past few years, in which IVL was one of the leading industry consolidators. In addition, IVL is closely linked to consumer staples and affordable products as PET are much lower in cost than glass and aluminium while Polyester Fibres and Yarns are more affordable compared to cotton. In line with the affordable nature of our products and their application in daily consumer staples, all the business segments of IVL have seen resilient demand in all parts of the world."
Sales revenues for PET rose 132% in the first 6 months, to US$2,066 million, from US$889 million in the same period last year, while the Core EBITDA climbed 105% to US$ 211 million, from US$ 103 million in the first half of 2010. Sales revenue in Q2/2011 increased by 38% QoQ and 163% YoY, due to higher sales volume and higher selling prices. In Q2/2011, PET gained better spreads as PTA spreads softened. When a company has vertical integration, the result is more stability and higher combined spreads. The operating rate in Q2/2011 was negatively impacted due to production loss from an unplanned shutdown at IVL's AlphaPet flagship in Decatur, USA.
Polyester value chain prices were volatile in the first six months of 2011, but IVL's Polyester and Wool Fibres and Yarns business reaped the benefit of cotton's sharp climb, with this segment's sales up 95% to US$ 400 million. Segment Core EBITDA of US$ 68 million in the first 6 months of 2011 appreciated 196% over the same period last year. Sales revenue increased by 12% over the previous quarter and 111% over the same period in the previous year, mainly due to higher selling prices And acquisitions in Indonesia of speciality Polyester assets.
In the first 6 months of 2011 PTA sales to external customers rose to US$ 555 million, 48% above the US$ 375 million achieved in the same period last year, Core EBITDA rose to US$ 69 million in the first 6 months, from US$ 51 million last year, a gain of 35%.
"While the market expects recent overcapacity of Asian PTA would lead to a drop in utilization and spreads, the company views PTA as part of a successful integration strategy whereby we use it for captive consumption by our PET and Polyester fibres businesses," Lohia explained.
"The production of PTA in the IVL group is virtually all for captive consumption as our total PTA capacity in Asia and Europe is integrated with our PET and Polyester fibers & yarns capacity. PTA improves reliability through security of supply for a key raw material to our end products of PET and Polyester fibers and yarns which have a global capacity of 3.6 million tons per annum".
"We hold a key strategic advantage in that Paraxylene, the raw material for producing PTA, is available in surplus in Thailand and IVL receives its supplies via a pipeline, thus reducing logistics cost further. Moreover, we always maintain volume contracts that ensure supply of key materials.
"It is becoming clear that spreads are returning to normal levels following the incomparable gains seen in Q1/2011. We view that Asian PTA and PET spreads are stable, as seen in our Q2 results, where PTA spreads were substantially offset by higher PET spreads," Lohia said.
"The future of IVL remains clear," said Mr. Lohia. "The flagship facilities in the USA and Thailand have been back on track since June and our plants are operating at high utilization rates. Shareholders will see an increasing bottom line from our diversification into new value-added products. These specialist polymers and fibres will open up new markets, give us access to new customers and help to strengthen our bottom line. I am pleased to inform that the company will pay a maiden interim divided of Baht 0.50 for the first 6 months.

Core business continues to rise 1: IVL's Core EBITDA Q1/2010 to Q2/2011
Explanation of terms
Inventory Gains
Inventory gains and losses result from movements in raw material prices from the end of the previous reported period to the end of current reported period. Inventory is part of the cost of sales. Inventory gains decrease the cost of sales and inventory losses increase the cost of sales.
Negative Goodwill
Also called a gain on a bargain purchase, occurs when an acquisition was made at a price lower than the fair value. The saving made by acquiring at lower than the fair value is accounted for as a gain on bargain purchase or negative goodwill.
About Indorama Ventures 
Indorama Ventures Public Company Limited, listed in Thailand (Bloomberg ticker IVL.TB) is a leading producer in the polyester value chain in Thailand with strong global network and manufacturing across Asia, Europe and North America. Its products serve major players in diversified end use markets, including food, beverages, personal and home care, health care, automotives, textile, and industrial. The company's main products are PTA, PET and Polyester fibre, which are distributed across the world. IVL has approximately 7,996 employees worldwide and last 12 months consolidated revenue of $ 4.6 billion.