IVL Corporate Policy

What is IVL’s future dividend policy?

IVL expects to maintain the same dividend policy, which is “to pay a total dividend of not less than 30% of the net profit after tax and appropriation to legal reserve. However the Board of Directors shall have the authority to consider waiving or amending such dividend policy subject to the condition that it will bring the greatest benefit to the shareholders, such as to use such portion of the net profit as reserve for debt repayment, capital investment for production expansion or as a support in case of changing market conditions which would affect the company’s future cash flows.” (2013 IVL Annual report)

There is no foreign limit.

Corporate Strategy

From IVL’s past experience of building/acquiring projects, we believe that real opportunities are likely to materialize. We are in discussions with a counterpart and those discussions are progressing well. We feel optimistic about the outcome and want to prepare for that.

IVL is negotiating with a potential partner who plans to build a world scale gas cracker in the USA where we can capture the advantaged feedstock economics of shale gas and set up an MEG plant. Since the project is under study, we cannot comment more than this.

North America is expected to remain competitive when comparing gas as a raw material and the naphtha used to make MEG in Asia. Hence, we expect this competitive advantage to remain in North America. Additional Ethylene will be consumed and absorbed with demand growth by 2020.

We are focusing on the projects which are under Plan 2018, US gas cracker participation and some very interesting M&A opportunities.

IVL’s human resource capabilities have expanded due to its low turnover of management and the acquisition of management talent from acquisitions such as Fibervisions, Old World, Trevira, Wellman, etc.

Investment Criteria

IVL targets a project IRR of ~15% when it assesses new projects, which, based on our D/E ratio, provides high ROE.


IVL will consider issuing both debentures and/or loans from financial institutions, depending on debt capital markets, interest rates, local vs. foreign.

The actual market price of the warrant will depend on, among other things, the prevailing market conditions, demand & supply of the warrants, and the underlying performance of IVL’s share price. As such, the warrant price cannot be accurately estimated.

Business Strategy

IVL has strong sustainable competitive advantages that has contributed to its growth and leadership position in the industry

  • Polymer Industry focus and leading market position as the world’s largest PET producer and leader in PTA and Polyester and Fibre products.
  • Global footprint to service major global corporations with local facilities to provide fast, logistics advantaged service with reliable, high quality product
  • One of the lowest cost producers in the industry due to advanced technologies, large scale and high capacity utilization, attractive acquisition cost, and integrated operations
  • Experienced management team with a proven track record of growing and managing the business internationally

We run our business and strategy by “following the customer”, whether that involves building new capacity, acquiring assets or developing specialty grade businesses. Our customers continue to value our commitment to the industry and the value added services we offer while providing the most competitive product, reliably and consistently.

Managing our growth with assets and acquisitions located across countries and continents is challenging. We need to manage a growing international business and integrate acquisitions by maximizing operational efficiency and integrating multiple local cultures into our global Indorama Ventures culture. We have proven our experience in handling multiple asset acquisitions simultaneously and growing the Company globally. We have a very strong and deep team of international operating managers to help us manage assets across the world and continue to add management talent through acquisitions and recruitment. The quality of the management teams currently in place is a very important part of our target assessment process.

IVL is a customer-centric organization focused on providing value-added services to customers. It is building its research and development capabilities to offer technological expertise and proprietary insights. IVL seeks to continue building long-term relationships with customers and will partner on R&D projects. The Company will evaluate value-added businesses as the opportunity arises if it is mutually beneficial to customers and shareholders.

We expect to have about 9,305 tonnes of capacityand 871 tonnes of joint venture capacity, by 2018. This is under the current plan only and does not include opportunities that may come up before that time.

In addition to our strong relationships with our core customers we also have strong, long-standing partnerships with our major suppliers of raw materials. For example, we have a co-located facility with BP and a 15 year supply agreement. Wherever possible we expect to expand in locations that allow us to continue to build on these close relationships and to ensure that we have access to low cost feedstocks. In fact, some of our most important suppliers regularly approach us to consider coordinating our expansion plans in growth markets, recognizing the strength and closeness of our commercial relationships. We will invest in order to back-integrate into PTA when it makes financial sense to so, however our primary objective in the next few years will be to expand in PET and polyester products, rather than become “long” in PTA first. As you would expect, our decisions will be driven by the demands of our customers and the opportunities which become available to us.

We expect to add in those areas of the world where our customers are growing, therefore we expect to increase our exposure to emerging economies in all major products. IVL recently announced an acquisition in China and is also looking at opportunities in emerging markets including the BRICs, Africa and Middle East. We expect to do this through a combination of acquisitions, brownfield expansions and greenfield additions. We also will be looking to add to our specialty portfolio, by adding new products, technical expertise, customer relationships and brands, through selective acquisitions. In more mature markets such as Western Europe, we anticipate a more measured approach, focused on small amounts of incremental capacity in PET and selective expansion in PTA where there is a strong commercial logic for doing so, primarily via brownfield expansions. North America may be a mature market but IVL favors the region as PET spreads have been consistently stable even during softer economic conditions and generates strong ROCE. Our North America operations provide an average of 15% ROCE.

Over 60% of revenue came from Europe and N

M&A and Organic Expansion

Where there are attractive assets, located in areas that are interesting to us, and available at prices that make sense, we will continue to look at acquiring them. Our strategy is not dependent on M&A but historically we believe that well-executed acquisitions can both accelerate the pace at which we can achieve our plans as well as create greater incremental shareholder value than certain greenfield or brownfield expansions. We have a deep and active pipeline of M&A targets, and we are in discussions with multiple parties at any one time. We remain disciplined however, and we do not expect every discussion to lead to a transaction. We also do not rely upon M&A to expand our business and typically exclude acquisitions from our targets when long-range planning. Our primary criteria for acquisitions is that they must be more valuable in our hands than in the sellers; that the price paid is less than we could achieve from building similar quality assets ourselves; that the assets are earnings accretive immediately (for under-performing assets) or within two full quarters after acquisition (for non-performing assets).

The industry in which we compete remains highly fragmented. Our primary competition is in the form of privately owned single-site producers, or diversified chemical companies who do not see polyester as a core business. Our recent acquisitions, and indeed other assets which have been sold, demonstrate that there are sellers in both of these groups. Critically for us, we see that there are far more sellers than buyers, creating an attractive buyer’s market for Indorama that offers significant opportunity to acquire assets on favourable terms. Most important of all, Indorama’s strategy does not include any meaningful M&A as a condition of success. We are not dependent upon acquiring assets for growth and will not acquire assets on terms that are not attractive to us when viewed against our existing growth plans.

Both buying and building have merits, under different circumstances. We like paying low prices, relative to book value, for underperforming assets that we are confident we can quickly turn into performing assets and will always seek out these types of opportunities. We also recognize that as new markets develop such assets may not be available, and the preferred approach will be to add to our existing capacity or build a new facility close to where our customers need the product. Each decision takes into account these factors, and others, with the overriding factor being the risk-adjusted shareholder return that each option offers.

The lead time on a greenfield project is from two and a half to three years depending on the size and location. A brownfield project may take up to 12-18 months. We undertake projects with a target average ROCE hurdle of 15% over 3 years. Historically, IVL’s expansion has been half acquisition and half greenfield. Historically and on average, IVL looks to acquire or develop brownfield projects at a cost of approx. $450/ton while greenfield projects are budgeted at $650/ton. We have two projects that are fairly advanced in study – one in India and the other in the Middle East. We would expect to be able to make these plans clearer to the public in the middle of 2011.

Financial Impact of Growth Strategy

We typically include the cost of the turn around of non-performing or under-performing assets in our acquisition cost analysis. Obviously, each situation is different but our valuation analysis assumes this cost is part of the purchase cost. We require that all under-performing assets (ie those that are profitable but can be improved by IVL) we acquire are earnings accretive immediately, and all non-performing assets (those that are loss-making or operating at very low utilization rates) are earnings accretive within two full quarters of Indorama ownership

We do not include any synergies (ie cost savings from duplication) in our asset acquisition plans. However, our structure allows us to add on standalone assets without incurring any additional centralized costs, thereby improving our overall return on central costs. Where we are acquiring companies, we typically expect to eliminate all duplicated costs quickly after assuming control, and all costs we incur in doing this are included in our valuation analysis when determining what to pay for such acquisitions.

IVL remains a very cost efficient organization, with limited centralized costs. We will continue to run our plants with as much decentralization as possible, and do not expect to incur any meaningful extra central costs as a result of our Aspiration 2014 plan.

While we do not believe that percentage margins are a relevant metric for us, given our pass-through cost structure for the majority of our business, we do expect our future business mix to be more profitable and yield above $110 EBITDA/ton given the higher R&D input and increased value attributed to a wider product range by customers due to their specific performance characteristics. We expect the biggest driver of profitability growth will remain the addition of capacity, combined with the operating leverage that we will gain from running plants at full capacity, and from the increased leverage of our existing central cost base over a broader asset footprint.

IVL has strong relationships with domestic and international banks. IVL views its banks as partners in building its business and regularly updates them on its strategy and business in addition to the Company’s regular, detailed disclosures on its website. Should IVL require further financing, the Company will seek the most attractive financing option available. IVL foresees continuing using its bank debt facility and looks forward to a long term relationship with its banking partners.

IVL’s has significant untapped bank lines. Our banks have already committed US$900mm in bank facilities which will be sufficient to fund the announced acquisitions. The Company also has over US$600mm in unutilized working capital bank lines. The company borrows long term loans with amortizing repayments spread over 5-6 years to finance project costs and acquisition costs. The working capital requirements of the business are funded from working capital facility consisting of short term loans, revolving loans and others. The interest costs are largely floating and benchmarked to the currency of loan in Thai Baht, US$ and Euros. There are standard financial covenants as in any bank financing and there is a system in place for monitoring of covenant compliance.

We have a dividend policy of not less than 30% of net profit after the deduction of appropriate reserves. Any decision to change the dividend is subject to regular review by our board of directors

The operating subsidiaries in Thailand and Overseas remit profits through cash dividends to the parent company in Thailand. IVL received Baht 1,232 million in dividend income from subsidiaries in year 2009 and has received Baht 1,055 million in dividend income upto September 30, 2010. Further, subsidiaries have announced additional dividends which will be received in Q4, 2010 by IVL.

We have a dividend policy of not less than 30% of net profit after the deduction of appropriate reserves. Any decision to change the dividend is subject to regular review by our board of directors

Industry Overview

The main inputs are PX, MEG, and PTA. PX is produced from refining crude oil and PX is the main input in the production of PTA. PTA is then used as an input material for the production of PET and other polyester products. As a significant and large scale buyer of PX and MEG, IVL benefits from low input costs due to increased bargaining power as a result of scale. There has been a shortage of PTA due to limited capacity. The only application of PTA is its role as a key component in the polyester polymer production process. Asia is the largest producer and consumer of PTA. Demand for PTA has been driven by strong demand growth for end products such as PET, polyester fibre etc., compounded by the lack of substitutes in the polymer production process. However, IVL has been shielded from PTA shortage and price hikes as IVL produces PTA and has several integrated PTA and PET operations.

The polyester value chain works on a perfect pass through basis. Therefore, when oil prices are high absolute product prices may rise but margins and spreads remain unaffected. Due to polyester being the lowest cost product in each of the application categories, there is no impact on demand. Internally, we have simulated various crude oil price scenarios and do not foresee any real impact on our business.

The ability to run plants at a high utilization rate spreads fixed costs across a larger volume base resulting in low per unit cost and high margins. A small increase in utilization improves profitability disproportionally.

IVL is uniquely positioned to run its plants at high capacity due to its strong customer relationships and ability to match the local footprint of customers and deliver products locally. IVL has strong relationships with global customers and can leverage the existing customer base to increase order demand. With the demand on hand, this allows them to run their plants at high utilization rates. The integrated PET and PTA operations enable IVL to run PTA plants close to full capacity due to captive PTA consumption. Approximately 50% of PTA produced is used internally. Secure supply of PTA results in the ability to maintain higher utilization rates compared with other PET manufacturers, even in periods of tight PTA supply. Its access to PTA shields the business from input price hikes, resulting in a low cost base and high margins.

The reason why companies decide to exit the polymer industry may be due to internal strategy decisions rather than industry dynamics. IVL has a favourable outlook of the polyester polymer industry and believes it is a very attractive sector to focus on and grow our business. Similarly, many research analysts also have a positive view on the industry. Additionally, IVL is also uniquely positioned to capitalize on opportunities given its place as the largest PET producer and one of the largest PTA and Polyester producers. IVL’s competitive advantages and business model gives the Company an edge in performing better than other players in the industry.

The Company is one of the lowest cost producers in the industry and has achieved this through economies of scale by operating large scale, efficient plants. IVL’s expertise at acquiring assets at attractive valuations reduces their capital cost. Its integrated business model with co-located operations of feedstock or suppliers increases its margins. IVL’s ability to run its plants at high utilization rates lowers its unit cost. IVL is one of the largest merchant PTA buyers in the U.S. market and one of the world’s largest buyers of PX and MEG. It leverages its size to purchase inputs at favourable prices.

PET is driven by demand for end products such as PET bottles and other packaging goods and is therefore consumer driven. Demand for PET packaging has been increasing as it performs better than competing packaging products such as glass or tetra pack and growth continues to remain strong due to both product substitution and increased demand. PET packaging has also been continually improved and increases the shelf-life of products in addition to being convenient, light and resistant. PET demand is expected to continue growing and the market is expected to continue to be strong in 2011. IVL has significant PET capacity and capabilities globally and will fully benefit from the demand and growth in the industry.

PTA is driven by demand for end market products (PET, fiber etc.) and the lack of substitutes available in polymer production. The sharp increase in Cotton prices to historical highs has resulted in higher demand for Polyester Fiber and Yarns resulting in scarcity of PTA. Limited PTA capacity available in China and globally has also contributed to tight PTA supply and rising PTA prices. While some new capacity addition may come online, supply is expected to remain tight and demand is expected to grow. IVL produces PTA and uses approximately 50% internally, thus securing PTA supply for its PET and polyester products. It sells the remaining PTA to customers.

The outlook for polyester is favourable and margins are expected to improve in the Polyester value chain. IVL is in a strong position to capture increasing demand and margins. The increasing demand for polyester and fiber is sustainable due to the continued consumer demand.


The raw materials of plastic bottles – PTA and MEG – are produced without adverse effects to the environment. The production of the fibres themselves is a clean process, without danger to the local environment, and with low levels of carbon emissions

PET is widely recycled as a material and can be recovered, and reused, by a simple washing processes to regenerate clean washed polymer flake (mechanical recycling), or by chemical treatment to break down the PET into oligomers or up to the starting monomers, terephthalic acid and ethylene glycol (chemical recycling). These intermediates are then purified and repolymerised into new PET resins. When material recycling is not feasible, PET can be incinerated with energy recovery

In landfills, PET is stable and inert with no leaching or groundwater risk. Bottles are crushed to very small volume, take up relatively little space, and generally add a degree of stability to the landfill

IVL subsidiaries operating plants have certifications of ISO 9001, ISO 14001 and OHSAS 18001. IVL subsidiary, AlphaPet, is implementing a PET recycling project.


The company will pay a dividend of not less than 30% of net profit after all legal deductions. As IVL receives most of its revenues in the form of dividends from subsidiaries, the company is required under Thai Revenue Code to deduct withholding tax on dividends to its shareholders, with the following exceptions:

  • Listed company shareholders
  • Any company holding more than 25% shares (where the holding period is more than six months)

Note that shareholders are not allowed to claim a refund of their withholding tax from the Thai Revenue Department because the dividend has been paid out of the non–taxable income of IVL.