ข้อมูลรายงานต่อตลาดหลักทรัพย์
Information Memorandum: IVL
- Information Memorandum -
Indorama Ventures Public Company Limited ("IVL", the "Company" or "we")
Head office
75/102 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke road, Kwaeng Klongtoey
Nuer, Khet Wattana, Bangkok 10110, Thailand Tel. 0-2661-6661 Fax. 0-2661-6664-5 Website
http://www.indoramaventures.com
Factory locations
The company is the holding company of domestic and international companies that involve in integrated
petrochemical product. The factory location of the subsidiaries is listed below.
Production Facility Location
AlphaPet PET Facility Decatur, Alabama, U.S.A.
StarPet PET Facility Asheboro, North Carolina, U.S.A.
Orion Global PET Facility Klaipeda, Lithuania
IRP Rotterdam PET facility Rotterdam, the Netherlands
IRP Workington PET Facility Workington, United Kingdom
Indorama Polymers/AsiaPet PET Facilities Lopburi, Thailand
Indorama Polyester Industries PET Resin Line Map Ta Phut, Thailand
Petform PET Packaging Facility Lopburi, Thailand
Indorama Polyester Industries Nakhon Pathom Polyester Facility Nakhon Pathom, Thailand
Indorama Polyester Industries Map Ta Phut Polyester Facility Map Ta Phut, Thailand
Indorama Petrochem PTA Facility Rayong, Thailand
TPT Petrochemicals PTA Facility Map Ta Phut, Thailand
Indorama Holdings Rotterdam PTA Facility Rotterdam, the Netherlands
Indorama Holdings Wool Yarn Facility Lopburi, Thailand
February 5, 2010 (Trading commencement on February 5, 2010)
Listing Date
4,334,271,047 common shares at 1 Baht par value per share totaling Baht
Listing Securities
4,334,271,047 divided into
- Existing ordinary shares of 3,351,543,910 shares
- Newly issued shares offered to public amounting 400,000,000 shares, and
- Newly issued shares offered to minority shareholders of Indorama Polymers
Public company Limited per the shareholding restructuring plan amounting
582,727,137 shares
As of February 5, 2010 (Trading commencement date)
Capital
Registered Capital Common Shares of Baht 5,082,000,000
Preferred Share of Baht -
Paid-up Capital Common Shares of Baht 4,334,271,047
Preferred Share of Baht -
Secondary market Stock Exchange of Thailand (the "SET")
Offering Price Baht 10.20 per share
Offering Date January 25-27, 2010
Objective and plans for utilizing the capital increase
1. Approximately Baht 1,342.4 million to repay a portion of working capital facilities; and
2. The remainder for working capital and general corporate purposes, including an acquisition
of additional assets or businesses related to our business activities if suitable opportunities
arise.
Green Shoe Option
Not more than 60,000,000 shares or representing 15 percent of total ordinary shares being
offered at this time were borrowed from Indorama Resources Limited to allocate to investors. Bualuang
Securities Public Company Limited, as the over-allotment agent, will procure shares to return to the
lender within 30 days from the first trading date on the SET in the following manners:
1. Purchasing shares on the SET; and/or
2. Exercise the options to purchase the common shares from Indorama Resources Limited
Type of Business and Nature of Operation
Product description
We, Indorama Ventures Public Company Limited, are a holding company conducting our business
through investment in companies engaging in manufacture of integrated petrochemical products both
domestic and international. These companies are manufacturer of distributor of polyethylene
terephthalate ("PET"), polyester fiber and yarn, purified terephthalic acid ("PTA"), and wool. We operate
through the following four business segments:
1. PET
Our PET business segment comprises primarily the manufacturing and sale of PET, a plastic
polymer resin primarily used as raw material for producing beverage containers and food packaging, as
well as for packaging of pharmaceutical and household products and in industrial packaging
applications. We also produce PET packaging in the form of preforms, bottles and closures through a
joint venture with Serm Suk Pcl, the exclusive Pepsi bottler in Thailand. We have two PET plants in
Thailand, three PET plants in Europe (the Netherlands, the United Kingdom and Lithuania) and two PET
plants in the United States (North Carolina and Alabama). Our aggregate PET installed capacity is
1,498,000 tonnes per year as of September 30, 2009.
2. Polyester Fiber and Yarn
Our polyester fiber and yarn business segment comprises the manufacture and sale of a variety
of polyester fibers, polyester yarns and other polyester products. Polyester is one of the most widely
used synthetic fibers in the world and is a versatile material with wide-ranging textile and industrial
applications. We have two polyester plants in Thailand with aggregate installed capacity of 244,800
tonnes per year as of September 30, 2009.
3. PTA
Our PTA business segment comprises the manufacture and sale of PTA, an organic acid in the
form of fine, white powder principally used as a raw material in the production of polyester products.
Our PTA business segment was started in 2008 as a support for our PET and polyester business
segments and forms part of our strategy of vertically integrating our operations. We have two PTA
plants in Thailand and a PTA plant in the Netherlands. Our aggregate PTA installed capacity is 1,590,000
tonnes per year as of September 30, 2009.
4. Wool
Our wool business is a niche business which comprises the development, production and sale of
wool yarns and wool tops. We have a worsted wool spinning mill in Thailand with an installed capacity
of 5,900 tonnes per year as of September 30, 2009.
Revenue Structure
Year Ended 31 December, Nine Months Ended 30
September,
Detail 2006 2007 2008 2009
(Bt (Bt (Bt (Bt
million) % million) % million) % million) %
Revenue Breakdown by Business Segments
PET ....................................... 11,847 63.1 25,551 79.0 40,969 76.8 32,850 55.6
Polyester fiber and yarn........... 4,461 23.8 4,501 13.9 4,975 9.3 7,526 12.8
PTA ....................................... - - - - 14,732 27.6 34,177 57.9
Wool...................................... 1,844 9.8 1,605 5.0 1,678 3.1 732 1.2
Others*.................................. 608 3.3 710 2.2 404 0.8 - -
Elimination ............................. - - (22) (0.1) (9,426) (17.6) (16,213) (27.5)
Consolidated revenue
from sale of goods ...... 18,760 100.0 32,345 100.0 53,332 100.0 59,072 100.0
Revenue Breakdown by Geographic Segments
Thailand................................. 4,186 22.3 4,745 14.7 6,064 11.4 8,665 14.7
North America ........................ 7,661 40.8 10,482 32.4 12,548 23.5 9,480 16.0
Europe................................... 2,488 13.3 12,520 38.7 25,500 47.8 22,582 38.2
Rest of the World .................... 4,425 23.6 4,598 14.2 9,220 17.3 18,345 31.1
Consolidated revenue
from sale of goods ...... .. 18,760 100.0 32,345 100.0 53,332 100.0 59,072 100.0
Remark: * Other revenue includes revenue from sales of chemical products
Target Customers and Distribution Channels
1. PET
We have PET sales and marketing teams in each of the regions in which we operate, which are
overseen by our sales and marketing head office in Thailand. We classify our main customers for PET
into four main groups:
Well-known brand name beverage companies with their own conversion plants to produce
-
PET bottles;
Well-known brand name beverage companies who sub-contract the production of PET bottle
-
to converters using PET resin purchased by such beverage companies;
PET resin traders; and
-
PET converters who use PET resin to manufacture preforms, bottles, sheets and other PET
-
packaging to service the needs of end users.
We sell our PET resin primarily through direct sales to end-use customers. Only a small
proportion of our sales takes place through agents and traders. One of our PET customers provided
income for the Company in 2006, 2007, 2008, and 9 months in 2009 ended 30 September in the
amount of Baht 2,940 million, Baht 4,466 million, Baht 5,259 million, Baht 4,346 million (or equivalent to
15.7%, 13.8%, 9.9%, 7.4%) of our total revenue from sale respectively. In addition, our 10 largest PET
customers by revenue accounted for 71.5% of our total PET revenues (or 45.1% of our total revenue
from the sale of goods) in 2006, 48.9% of our total PET revenues (or 38.6% of our total revenue from
the sale of goods) in 2007, 46.7% of our total PET revenues (or 35.9% of our total revenue from the
sale of goods) in 2008 and 40.3% of our total PET revenues (or 22.4% of our total revenue from the
sale of goods) in the nine months ended September 30, 2009.
We are the only PET resin producer with production facilities in Asia, North America and Europe,
which allows us to market our PET resin products globally.
2. Polyester Fiber and Yarn
Our main customers for polyester products are companies producing textiles for apparel,
companies producing home textiles, and industrial companies such as automotive companies and
packaging film producers. Our polyester sales and marketing head office is located in Thailand and is
responsible for sales and marketing activities relating to our customers worldwide. We sell our polyester
products directly to our customers for domestic sales in Thailand and through sales agents for our
export sales.
Our 10 largest polyester customers by revenue accounted for 58.2% of our total polyester fiber
and yarn revenues (or 13.8% of our total revenue from the sale of goods) in 2006, 58.9% of our total
polyester fiber and yarn revenues (or 8.2% of our total revenue from the sale of goods) in 2007, 50.6%
of our total polyester fiber and yarn revenues (or 4.7% of our total revenue from the sale of goods) in
2008 and 31.3% of our total polyester fiber and yarn revenues (or 4.0% of our total revenue from the
sale of goods) in the nine months ended September 30, 2009.
3. PTA
Our main customers for PTA are PET resin and polyester producers. A significant proportion of
our PTA production is used by our downstream PET and polyester production facilities. We sell the
remaining PTA that we do not use within the group to third party customers. In 2008 and the nine
months ended September 30, 2009, we used 51.8% of our PTA production volume and 45.4% of our
PTA production volume, respectively, within our group, and we sold 48.2% and 54.6%, respectively, of
our PTA production volume to third party customers.
We sell our PTA either directly to our customers or through trading companies. We sell some of
our PTA through trading companies principally because either the trading company provides the end
customer with trade finance or because the trading company is purchasing for its own account. We bear
the cost of the trading companies' commissions by reflecting it in the PTA price that we charge the
customers. Although we conduct a portion of our sales through trading companies, we know the
identities of the end customers. Our PTA sales and marketing head office is located in Thailand and is
responsible for sales and marketing activities relating to our customers worldwide.
Our 10 largest PTA customers by revenue accounted for 25.9% of our total PTA revenues (or
7.1% of our total revenue from the sale of goods) in 2008 and 27.2% of our total PTA revenues (or
15.7% of our total revenue from the sale of goods) in the nine months ended September 30, 2009.
4. Wool
Our wool business is unique and aims to export wool tops and worsted wool yarn. We have a
worsted wool spinning mill, the first and the only integrated worsted wool spinning mill in Thailand.
However, the worsted wool yarn is a high quality product and is mostly used for high-value textile. For
example, high quality clothing, woven clothes, high quality bed sheet, and other woven product used for
interior designing.
Sources of Supply
The main raw materials used in the production of the polyester value chain are PX and MEG.
Other additives and utilities that we require in our business include acetic acid, isopthalic acid, various
catalysts and various gases.
PTA
We have vertically integrated a portion of our PET business to our PTA business to provide
reliable and cost effective PTA supplies. Our IRP Rotterdam PET facility and our Indorama Polyester
Industries PET resin line are co-located with our IRH Rotterdam PTA facility and TPT Petrochemicals PTA
facility, respectively. In addition, our AlphaPet PET facility is co-located with the PTA production facility
of BP with whom we have long-term offtake agreements to purchase PTA. Our Orion Global PET facility
obtains some of its PTA from our Indorama Petrochem PTA facility.
MEG
We purchase MEG, a downstream derivative of ethylene, from Equate and Sabic through short
and medium term contracts at a price linked to benchmark published prices. In order to obtain the best
prices for the MEG that we purchase, we source for, and negotiate the prices of, these raw materials
through an informal arrangement with the S.P. Lohia Group (which is controlled by our Chairman and
his immediate family) and the O.P. Lohia Group (which is controlled by the brother of both our Chairman
and our Chief Executive Officer). However, purchase contracts are entered into by the relevant
subsidiary company according to such subsidiary's volume and specification requirements. Our group,
the S.P. Lohia Group and the O.P. Lohia Group combined are the largest, and our group alone is the
second largest, purchasers of MEG worldwide. By being a global producer of polyester polymers, we are
able to procure MEG on a pan-global basis.
Paraxylene
We are amongst the world's largest buyers of PX. We purchase our PX under long term
contracts with PTT Aromatics and Refinery Public Company Limited, PTT Public Company Limited, Thai
Paraxylene Company Limited and Exxon Chemical Thailand Limited, typically through long-term
contracts. Our Thai PTA plants are able to take delivery of PX either from Thai or international suppliers
via their own Map Ta Phut pipeline which runs directly from the Thai Tank Terminal (our raw material
storage services) to their tank yard.
Others
Other consumables that we use include acetic acid, IPA, various catalysts, nitrogen and
hydrogen. We purchase these consumables from various suppliers typically under short term contracts
of one year.
Market Competition
1. PET
The global market for PET resin is highly competitive, involving a large number of producers
located throughout the world, some of whom may have greater financial resources than us. Because
PET resin is a commodity product, competition in the PET resin market is predominantly based on price
and, to a lesser degree, on reliability and consistency of product quality and specifications and lead
times to product delivery. We believe our vertically integrated operations provide us with a competitive
advantage because we have secured our raw materials source and cost control over our principal raw
material, PTA.
The European Union has adopted anti-dumping duties on PET resin imports from various Asian
countries, including Thailand. In addition, the U.S. has imposed import duties on PET resin imports from
various countries, including Thailand, at a rate between 3.0% and 6.5%. These anti-dumping duties and
import duties, together with the transportation costs in shipping PET resin from the country of
production to these markets, make it more difficult for imported PET resin to compete with locally
produced PET resin. Therefore, we believe we have a competitive advantage in having PET resin
production facilities in Europe and in the U.S.
Our major competitors in the European market are La Seda de Barcelona, Equipolymers and
Neo Group. Our major competitors in the North American market are M&G Group, the world's largest
producer of PET resin by production capacity, Eastman Chemical Company, DAK Americas LLC, and
INVISTA. Our competitors in the Thai market are Thai Shinkong Industry Corp., Thai PET Resin Co.,
Ltd., and Bangkok Polyester Public Company Limited. Although PET technology is available through
commercial licenses, we believe the capital investment required to achieve profitability through
economies of scale may inhibit new entrants to the market.
2. Polyester Fiber and Yarn
Competition in the global polyester industry can be characterized by the presence of large
diversified industrial companies, as well as a large number of relatively small niche players with capacity
of less than 10,000 tonnes per annum. Larger polyester producers usually focus on high-volume
standard fibers for sale in domestic markets where the level of competition is high and where
competition is predominantly based on price and, to a lesser degree, on consistency of product quality,
specifications, and lead times to product delivery. We intend to continue to vertically integrate our
operations, which we believe will provide us with a competitive advantage because we have security of
supply and a degree of cost control over, our principal raw material, PTA. We also intend to avoid
competing with the larger polyester producers for commodity polyester products by continuing to focus
on increasing the production of non-commodity products so that they comprise approximately half of
our total polyester output.
Large polyester producers that focus on volume typically lack marketing channels for the sale of
niche products. Therefore, the level of competition in niche product markets is moderate to low and
pricing pressure is typically lower than for polyester standard fibers or for PET resin. In niche markets,
competition is based more on the ability to meet product quality and specifications and lead times to
product delivery.
There are no anti-dumping or import duties or tariffs in Europe, North America, or Asia on the
types of polyester fiber, yarn, or other polyester products that we sell that would have a material impact
on our business, financial condition, results of operations, and prospects.
The table below summarizes our competitors for our polyester products.
Product Thai Domestic Market Export Market
Film grade chips Huvis-Korea Toray-Korea, SK Keris-Indonesia, Mitsubishi Chemical, Tejin -
Japan
Fiber Kangwal, Tejin Polyester, Thai Reliance, Formosa, Huvis, Far Eastern Textiles, Recron
Polyester Polyester (Reliance), Nan Ya, Alpek
Yarn Kangwal, Tejin Polyester, Thai Recron Polyester, SK Chemicals, Polyfinis - Indonesia, CFC
Polyester China, Xiangshang- China, Far Eastern
3. PTA
(more)
Indorama Ventures Public Company Limited ("IVL", the "Company" or "we")
Head office
75/102 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke road, Kwaeng Klongtoey
Nuer, Khet Wattana, Bangkok 10110, Thailand Tel. 0-2661-6661 Fax. 0-2661-6664-5 Website
http://www.indoramaventures.com
Factory locations
The company is the holding company of domestic and international companies that involve in integrated
petrochemical product. The factory location of the subsidiaries is listed below.
Production Facility Location
AlphaPet PET Facility Decatur, Alabama, U.S.A.
StarPet PET Facility Asheboro, North Carolina, U.S.A.
Orion Global PET Facility Klaipeda, Lithuania
IRP Rotterdam PET facility Rotterdam, the Netherlands
IRP Workington PET Facility Workington, United Kingdom
Indorama Polymers/AsiaPet PET Facilities Lopburi, Thailand
Indorama Polyester Industries PET Resin Line Map Ta Phut, Thailand
Petform PET Packaging Facility Lopburi, Thailand
Indorama Polyester Industries Nakhon Pathom Polyester Facility Nakhon Pathom, Thailand
Indorama Polyester Industries Map Ta Phut Polyester Facility Map Ta Phut, Thailand
Indorama Petrochem PTA Facility Rayong, Thailand
TPT Petrochemicals PTA Facility Map Ta Phut, Thailand
Indorama Holdings Rotterdam PTA Facility Rotterdam, the Netherlands
Indorama Holdings Wool Yarn Facility Lopburi, Thailand
February 5, 2010 (Trading commencement on February 5, 2010)
Listing Date
4,334,271,047 common shares at 1 Baht par value per share totaling Baht
Listing Securities
4,334,271,047 divided into
- Existing ordinary shares of 3,351,543,910 shares
- Newly issued shares offered to public amounting 400,000,000 shares, and
- Newly issued shares offered to minority shareholders of Indorama Polymers
Public company Limited per the shareholding restructuring plan amounting
582,727,137 shares
As of February 5, 2010 (Trading commencement date)
Capital
Registered Capital Common Shares of Baht 5,082,000,000
Preferred Share of Baht -
Paid-up Capital Common Shares of Baht 4,334,271,047
Preferred Share of Baht -
Secondary market Stock Exchange of Thailand (the "SET")
Offering Price Baht 10.20 per share
Offering Date January 25-27, 2010
Objective and plans for utilizing the capital increase
1. Approximately Baht 1,342.4 million to repay a portion of working capital facilities; and
2. The remainder for working capital and general corporate purposes, including an acquisition
of additional assets or businesses related to our business activities if suitable opportunities
arise.
Green Shoe Option
Not more than 60,000,000 shares or representing 15 percent of total ordinary shares being
offered at this time were borrowed from Indorama Resources Limited to allocate to investors. Bualuang
Securities Public Company Limited, as the over-allotment agent, will procure shares to return to the
lender within 30 days from the first trading date on the SET in the following manners:
1. Purchasing shares on the SET; and/or
2. Exercise the options to purchase the common shares from Indorama Resources Limited
Type of Business and Nature of Operation
Product description
We, Indorama Ventures Public Company Limited, are a holding company conducting our business
through investment in companies engaging in manufacture of integrated petrochemical products both
domestic and international. These companies are manufacturer of distributor of polyethylene
terephthalate ("PET"), polyester fiber and yarn, purified terephthalic acid ("PTA"), and wool. We operate
through the following four business segments:
1. PET
Our PET business segment comprises primarily the manufacturing and sale of PET, a plastic
polymer resin primarily used as raw material for producing beverage containers and food packaging, as
well as for packaging of pharmaceutical and household products and in industrial packaging
applications. We also produce PET packaging in the form of preforms, bottles and closures through a
joint venture with Serm Suk Pcl, the exclusive Pepsi bottler in Thailand. We have two PET plants in
Thailand, three PET plants in Europe (the Netherlands, the United Kingdom and Lithuania) and two PET
plants in the United States (North Carolina and Alabama). Our aggregate PET installed capacity is
1,498,000 tonnes per year as of September 30, 2009.
2. Polyester Fiber and Yarn
Our polyester fiber and yarn business segment comprises the manufacture and sale of a variety
of polyester fibers, polyester yarns and other polyester products. Polyester is one of the most widely
used synthetic fibers in the world and is a versatile material with wide-ranging textile and industrial
applications. We have two polyester plants in Thailand with aggregate installed capacity of 244,800
tonnes per year as of September 30, 2009.
3. PTA
Our PTA business segment comprises the manufacture and sale of PTA, an organic acid in the
form of fine, white powder principally used as a raw material in the production of polyester products.
Our PTA business segment was started in 2008 as a support for our PET and polyester business
segments and forms part of our strategy of vertically integrating our operations. We have two PTA
plants in Thailand and a PTA plant in the Netherlands. Our aggregate PTA installed capacity is 1,590,000
tonnes per year as of September 30, 2009.
4. Wool
Our wool business is a niche business which comprises the development, production and sale of
wool yarns and wool tops. We have a worsted wool spinning mill in Thailand with an installed capacity
of 5,900 tonnes per year as of September 30, 2009.
Revenue Structure
Year Ended 31 December, Nine Months Ended 30
September,
Detail 2006 2007 2008 2009
(Bt (Bt (Bt (Bt
million) % million) % million) % million) %
Revenue Breakdown by Business Segments
PET ....................................... 11,847 63.1 25,551 79.0 40,969 76.8 32,850 55.6
Polyester fiber and yarn........... 4,461 23.8 4,501 13.9 4,975 9.3 7,526 12.8
PTA ....................................... - - - - 14,732 27.6 34,177 57.9
Wool...................................... 1,844 9.8 1,605 5.0 1,678 3.1 732 1.2
Others*.................................. 608 3.3 710 2.2 404 0.8 - -
Elimination ............................. - - (22) (0.1) (9,426) (17.6) (16,213) (27.5)
Consolidated revenue
from sale of goods ...... 18,760 100.0 32,345 100.0 53,332 100.0 59,072 100.0
Revenue Breakdown by Geographic Segments
Thailand................................. 4,186 22.3 4,745 14.7 6,064 11.4 8,665 14.7
North America ........................ 7,661 40.8 10,482 32.4 12,548 23.5 9,480 16.0
Europe................................... 2,488 13.3 12,520 38.7 25,500 47.8 22,582 38.2
Rest of the World .................... 4,425 23.6 4,598 14.2 9,220 17.3 18,345 31.1
Consolidated revenue
from sale of goods ...... .. 18,760 100.0 32,345 100.0 53,332 100.0 59,072 100.0
Remark: * Other revenue includes revenue from sales of chemical products
Target Customers and Distribution Channels
1. PET
We have PET sales and marketing teams in each of the regions in which we operate, which are
overseen by our sales and marketing head office in Thailand. We classify our main customers for PET
into four main groups:
Well-known brand name beverage companies with their own conversion plants to produce
-
PET bottles;
Well-known brand name beverage companies who sub-contract the production of PET bottle
-
to converters using PET resin purchased by such beverage companies;
PET resin traders; and
-
PET converters who use PET resin to manufacture preforms, bottles, sheets and other PET
-
packaging to service the needs of end users.
We sell our PET resin primarily through direct sales to end-use customers. Only a small
proportion of our sales takes place through agents and traders. One of our PET customers provided
income for the Company in 2006, 2007, 2008, and 9 months in 2009 ended 30 September in the
amount of Baht 2,940 million, Baht 4,466 million, Baht 5,259 million, Baht 4,346 million (or equivalent to
15.7%, 13.8%, 9.9%, 7.4%) of our total revenue from sale respectively. In addition, our 10 largest PET
customers by revenue accounted for 71.5% of our total PET revenues (or 45.1% of our total revenue
from the sale of goods) in 2006, 48.9% of our total PET revenues (or 38.6% of our total revenue from
the sale of goods) in 2007, 46.7% of our total PET revenues (or 35.9% of our total revenue from the
sale of goods) in 2008 and 40.3% of our total PET revenues (or 22.4% of our total revenue from the
sale of goods) in the nine months ended September 30, 2009.
We are the only PET resin producer with production facilities in Asia, North America and Europe,
which allows us to market our PET resin products globally.
2. Polyester Fiber and Yarn
Our main customers for polyester products are companies producing textiles for apparel,
companies producing home textiles, and industrial companies such as automotive companies and
packaging film producers. Our polyester sales and marketing head office is located in Thailand and is
responsible for sales and marketing activities relating to our customers worldwide. We sell our polyester
products directly to our customers for domestic sales in Thailand and through sales agents for our
export sales.
Our 10 largest polyester customers by revenue accounted for 58.2% of our total polyester fiber
and yarn revenues (or 13.8% of our total revenue from the sale of goods) in 2006, 58.9% of our total
polyester fiber and yarn revenues (or 8.2% of our total revenue from the sale of goods) in 2007, 50.6%
of our total polyester fiber and yarn revenues (or 4.7% of our total revenue from the sale of goods) in
2008 and 31.3% of our total polyester fiber and yarn revenues (or 4.0% of our total revenue from the
sale of goods) in the nine months ended September 30, 2009.
3. PTA
Our main customers for PTA are PET resin and polyester producers. A significant proportion of
our PTA production is used by our downstream PET and polyester production facilities. We sell the
remaining PTA that we do not use within the group to third party customers. In 2008 and the nine
months ended September 30, 2009, we used 51.8% of our PTA production volume and 45.4% of our
PTA production volume, respectively, within our group, and we sold 48.2% and 54.6%, respectively, of
our PTA production volume to third party customers.
We sell our PTA either directly to our customers or through trading companies. We sell some of
our PTA through trading companies principally because either the trading company provides the end
customer with trade finance or because the trading company is purchasing for its own account. We bear
the cost of the trading companies' commissions by reflecting it in the PTA price that we charge the
customers. Although we conduct a portion of our sales through trading companies, we know the
identities of the end customers. Our PTA sales and marketing head office is located in Thailand and is
responsible for sales and marketing activities relating to our customers worldwide.
Our 10 largest PTA customers by revenue accounted for 25.9% of our total PTA revenues (or
7.1% of our total revenue from the sale of goods) in 2008 and 27.2% of our total PTA revenues (or
15.7% of our total revenue from the sale of goods) in the nine months ended September 30, 2009.
4. Wool
Our wool business is unique and aims to export wool tops and worsted wool yarn. We have a
worsted wool spinning mill, the first and the only integrated worsted wool spinning mill in Thailand.
However, the worsted wool yarn is a high quality product and is mostly used for high-value textile. For
example, high quality clothing, woven clothes, high quality bed sheet, and other woven product used for
interior designing.
Sources of Supply
The main raw materials used in the production of the polyester value chain are PX and MEG.
Other additives and utilities that we require in our business include acetic acid, isopthalic acid, various
catalysts and various gases.
PTA
We have vertically integrated a portion of our PET business to our PTA business to provide
reliable and cost effective PTA supplies. Our IRP Rotterdam PET facility and our Indorama Polyester
Industries PET resin line are co-located with our IRH Rotterdam PTA facility and TPT Petrochemicals PTA
facility, respectively. In addition, our AlphaPet PET facility is co-located with the PTA production facility
of BP with whom we have long-term offtake agreements to purchase PTA. Our Orion Global PET facility
obtains some of its PTA from our Indorama Petrochem PTA facility.
MEG
We purchase MEG, a downstream derivative of ethylene, from Equate and Sabic through short
and medium term contracts at a price linked to benchmark published prices. In order to obtain the best
prices for the MEG that we purchase, we source for, and negotiate the prices of, these raw materials
through an informal arrangement with the S.P. Lohia Group (which is controlled by our Chairman and
his immediate family) and the O.P. Lohia Group (which is controlled by the brother of both our Chairman
and our Chief Executive Officer). However, purchase contracts are entered into by the relevant
subsidiary company according to such subsidiary's volume and specification requirements. Our group,
the S.P. Lohia Group and the O.P. Lohia Group combined are the largest, and our group alone is the
second largest, purchasers of MEG worldwide. By being a global producer of polyester polymers, we are
able to procure MEG on a pan-global basis.
Paraxylene
We are amongst the world's largest buyers of PX. We purchase our PX under long term
contracts with PTT Aromatics and Refinery Public Company Limited, PTT Public Company Limited, Thai
Paraxylene Company Limited and Exxon Chemical Thailand Limited, typically through long-term
contracts. Our Thai PTA plants are able to take delivery of PX either from Thai or international suppliers
via their own Map Ta Phut pipeline which runs directly from the Thai Tank Terminal (our raw material
storage services) to their tank yard.
Others
Other consumables that we use include acetic acid, IPA, various catalysts, nitrogen and
hydrogen. We purchase these consumables from various suppliers typically under short term contracts
of one year.
Market Competition
1. PET
The global market for PET resin is highly competitive, involving a large number of producers
located throughout the world, some of whom may have greater financial resources than us. Because
PET resin is a commodity product, competition in the PET resin market is predominantly based on price
and, to a lesser degree, on reliability and consistency of product quality and specifications and lead
times to product delivery. We believe our vertically integrated operations provide us with a competitive
advantage because we have secured our raw materials source and cost control over our principal raw
material, PTA.
The European Union has adopted anti-dumping duties on PET resin imports from various Asian
countries, including Thailand. In addition, the U.S. has imposed import duties on PET resin imports from
various countries, including Thailand, at a rate between 3.0% and 6.5%. These anti-dumping duties and
import duties, together with the transportation costs in shipping PET resin from the country of
production to these markets, make it more difficult for imported PET resin to compete with locally
produced PET resin. Therefore, we believe we have a competitive advantage in having PET resin
production facilities in Europe and in the U.S.
Our major competitors in the European market are La Seda de Barcelona, Equipolymers and
Neo Group. Our major competitors in the North American market are M&G Group, the world's largest
producer of PET resin by production capacity, Eastman Chemical Company, DAK Americas LLC, and
INVISTA. Our competitors in the Thai market are Thai Shinkong Industry Corp., Thai PET Resin Co.,
Ltd., and Bangkok Polyester Public Company Limited. Although PET technology is available through
commercial licenses, we believe the capital investment required to achieve profitability through
economies of scale may inhibit new entrants to the market.
2. Polyester Fiber and Yarn
Competition in the global polyester industry can be characterized by the presence of large
diversified industrial companies, as well as a large number of relatively small niche players with capacity
of less than 10,000 tonnes per annum. Larger polyester producers usually focus on high-volume
standard fibers for sale in domestic markets where the level of competition is high and where
competition is predominantly based on price and, to a lesser degree, on consistency of product quality,
specifications, and lead times to product delivery. We intend to continue to vertically integrate our
operations, which we believe will provide us with a competitive advantage because we have security of
supply and a degree of cost control over, our principal raw material, PTA. We also intend to avoid
competing with the larger polyester producers for commodity polyester products by continuing to focus
on increasing the production of non-commodity products so that they comprise approximately half of
our total polyester output.
Large polyester producers that focus on volume typically lack marketing channels for the sale of
niche products. Therefore, the level of competition in niche product markets is moderate to low and
pricing pressure is typically lower than for polyester standard fibers or for PET resin. In niche markets,
competition is based more on the ability to meet product quality and specifications and lead times to
product delivery.
There are no anti-dumping or import duties or tariffs in Europe, North America, or Asia on the
types of polyester fiber, yarn, or other polyester products that we sell that would have a material impact
on our business, financial condition, results of operations, and prospects.
The table below summarizes our competitors for our polyester products.
Product Thai Domestic Market Export Market
Film grade chips Huvis-Korea Toray-Korea, SK Keris-Indonesia, Mitsubishi Chemical, Tejin -
Japan
Fiber Kangwal, Tejin Polyester, Thai Reliance, Formosa, Huvis, Far Eastern Textiles, Recron
Polyester Polyester (Reliance), Nan Ya, Alpek
Yarn Kangwal, Tejin Polyester, Thai Recron Polyester, SK Chemicals, Polyfinis - Indonesia, CFC
Polyester China, Xiangshang- China, Far Eastern
3. PTA
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