Earnings Release
Indorama Ventures (IVL) strategy and core earnings deliver strong 2014 results
Bangkok, Thailand –23rd February 2015 –Indorama Ventures Public Company Limited (IVL), a world-leading producer of intermediate petrochemicals, has reported strong full year 2014 results.
The company reported full year core earnings of THB 5.1 billion, an increase of 146% over 2013 and after extraordinary and non-cash items, reported earnings were THB 1.48 billion an increase of 12% over 2013. Core EBITDA grew 30% over 2013, to THB 19.5 billion in 2014.
Raw material prices fell 2nd half 2014 with crude oil, releasing cash flow on lower absolute prices. Cash from Operations in 2014 was THB 22.4 billion, an increase of 114% over 2013.
Mr. Aloke Lohia, Group Chief Executive Officer and Vice Chairman of Indorama Ventures Public Company Limited stated:
“The company’s strategic focus on developing a high value-added (HVA) portfolio has started to bring in rewards. We are developing a portfolio that has multiple assets in complementary operations within the hygiene fibers space and are developing further into automotive and industrial fibers and yarns, especially where they pertain to health and safety such as tires, safety belts and airbags. Between the higher profits enjoyed by the Fibers and Yarns business and ongoing cost savings through operational excellence projects globally, the core EBIDTA has grown 30%. While we have seen the impact of crude oil prices falling leading to inventory write-downs in the fourth quarter, the benefit has been improvements to our cash flow from operations as we use less working capital on lower prices.
“We are delivering on our strategy to acquire businesses that would be accretive to the bottom line and cash flow. Our necessities business in PET and packaging materials is growing. Geographically, we are developing our service to major customers in emerging market, notably in Turkey, where we are now a major PET player. Volumes are increasing at our IVL Guangdong PET plant; our state-of-the-art polyester fibers plant, Polychem (CP4), in Indonesia and we have achieved better utilization of other assets, such as in Poland by enhancing its capacity.
“Indorama Ventures is 25 years old this year and we are still reinventing ourselves. We expect to close a deal to acquire Performance Fibers Asia in China soon, and thereby gain synergies with our current platform of superior auto sector assets in Europe. Another acquisition, Polyplex in Turkey, will allow us to consolidate the Southeast European market for PET and provide greater volumes in our key markets.
“We are also now focusing more on our sustainability going forward. Our recycled product volumes are growing and our capability has been extended to our Mexican and Thai operations in 2014.”
The PET Business Division
The PET segment represented 50% of IVL production and 48% of IVL Core EBITDA in 2014. The segment saw production increase from 2.9 MMT in 2013 to 3.1 MMT in 2014, a growth of 7% year on year. Due to an increase in production the segment achieved a Core EBITDA of US$286M in 2014 against US$ 248M 2013, a growth of 15% year on year.
Fibers and Yarns Business Division
This segment saw production increase from 0.91 MMT in 2013 to 1.15 MMT in 2014, a growth of 26% year on year. Enhancement of HVA products with the acquisition of PHP Fibers led to a fast increase in margins. The Fibers and Yarns Division achieved a Core EBITDA of US$126M in 2014 against US$ 95M 2013, a growth of 34% YoY.
Feedstock
The Feedstock segment represented 32% of IVL production and 32% of IVL Core EBITDA in 2014. With the strong PEO margins in 2014 over 2013 and cost optimization measures at PTA sites led to an improvement in Core EBITDA per ton to US$97/t in 2014 from US$ 73/t in 2013.
Capital Expenditures
The company’s capex plan is to invest around US$ 1.9 billion on growth capex and US$ 0.3 billion on maintenance capex from 2015-18 (total US$ 2.2 billion) funded through cash flow from operations, debts and recently issued perpetual debentures. Out of this US$ 2.2 billion, we expect to spend around US$ 1.5 billion in 2015 itself, where we have already announced projects worth US$ 0.6 billion and rest US$ 0.9 billion worth of projects are under active discussions. If all these projects are announced and completed we expect to add 25 % of new capacity to IVL in 2015 over 2014. IVL targets to maintain a net debt to equity ratio of around 1.0 time in the long term. As on Dec’14 it stands at 0.83 times. IVL businesses have a track record of strong cash flows since the majority of sales are to the consumer necessities sector.
The company reported full year core earnings of THB 5.1 billion, an increase of 146% over 2013 and after extraordinary and non-cash items, reported earnings were THB 1.48 billion an increase of 12% over 2013. Core EBITDA grew 30% over 2013, to THB 19.5 billion in 2014.
Raw material prices fell 2nd half 2014 with crude oil, releasing cash flow on lower absolute prices. Cash from Operations in 2014 was THB 22.4 billion, an increase of 114% over 2013.
Mr. Aloke Lohia, Group Chief Executive Officer and Vice Chairman of Indorama Ventures Public Company Limited stated:
“The company’s strategic focus on developing a high value-added (HVA) portfolio has started to bring in rewards. We are developing a portfolio that has multiple assets in complementary operations within the hygiene fibers space and are developing further into automotive and industrial fibers and yarns, especially where they pertain to health and safety such as tires, safety belts and airbags. Between the higher profits enjoyed by the Fibers and Yarns business and ongoing cost savings through operational excellence projects globally, the core EBIDTA has grown 30%. While we have seen the impact of crude oil prices falling leading to inventory write-downs in the fourth quarter, the benefit has been improvements to our cash flow from operations as we use less working capital on lower prices.
“We are delivering on our strategy to acquire businesses that would be accretive to the bottom line and cash flow. Our necessities business in PET and packaging materials is growing. Geographically, we are developing our service to major customers in emerging market, notably in Turkey, where we are now a major PET player. Volumes are increasing at our IVL Guangdong PET plant; our state-of-the-art polyester fibers plant, Polychem (CP4), in Indonesia and we have achieved better utilization of other assets, such as in Poland by enhancing its capacity.
“Indorama Ventures is 25 years old this year and we are still reinventing ourselves. We expect to close a deal to acquire Performance Fibers Asia in China soon, and thereby gain synergies with our current platform of superior auto sector assets in Europe. Another acquisition, Polyplex in Turkey, will allow us to consolidate the Southeast European market for PET and provide greater volumes in our key markets.
“We are also now focusing more on our sustainability going forward. Our recycled product volumes are growing and our capability has been extended to our Mexican and Thai operations in 2014.”
The PET Business Division
The PET segment represented 50% of IVL production and 48% of IVL Core EBITDA in 2014. The segment saw production increase from 2.9 MMT in 2013 to 3.1 MMT in 2014, a growth of 7% year on year. Due to an increase in production the segment achieved a Core EBITDA of US$286M in 2014 against US$ 248M 2013, a growth of 15% year on year.
Fibers and Yarns Business Division
This segment saw production increase from 0.91 MMT in 2013 to 1.15 MMT in 2014, a growth of 26% year on year. Enhancement of HVA products with the acquisition of PHP Fibers led to a fast increase in margins. The Fibers and Yarns Division achieved a Core EBITDA of US$126M in 2014 against US$ 95M 2013, a growth of 34% YoY.
Feedstock
The Feedstock segment represented 32% of IVL production and 32% of IVL Core EBITDA in 2014. With the strong PEO margins in 2014 over 2013 and cost optimization measures at PTA sites led to an improvement in Core EBITDA per ton to US$97/t in 2014 from US$ 73/t in 2013.
Capital Expenditures
The company’s capex plan is to invest around US$ 1.9 billion on growth capex and US$ 0.3 billion on maintenance capex from 2015-18 (total US$ 2.2 billion) funded through cash flow from operations, debts and recently issued perpetual debentures. Out of this US$ 2.2 billion, we expect to spend around US$ 1.5 billion in 2015 itself, where we have already announced projects worth US$ 0.6 billion and rest US$ 0.9 billion worth of projects are under active discussions. If all these projects are announced and completed we expect to add 25 % of new capacity to IVL in 2015 over 2014. IVL targets to maintain a net debt to equity ratio of around 1.0 time in the long term. As on Dec’14 it stands at 0.83 times. IVL businesses have a track record of strong cash flows since the majority of sales are to the consumer necessities sector.