Reports to the Stock Exchange
Submission of Reviewed Finacial Statements Q2/2010 and MD&A
Ref.No. IVL 001/08/2010
August 11, 2010
The President
The Stock Exchange of Thailand
Subject: Submission of Reviewed Financial Statements of Indorama Ventures
Public Company for the 2nd quarter of 2010 and the 6 months ended June 30,
2010 and the Management's Discussion and Analysis (MD&A)
We are pleased to submit:
1. A copy of the Consolidated and Company only Reviewed Financial Statements
for the 2nd quarter of 2010 and the 6 months ended June 30, 2010 (a copy in
Thai and English)
2. Management's Discussion and Analysis (MD&A) for the 2nd quarter of 2010 and
the 6 months ended June 30, 2010 (a copy in Thai and English)
3. Company's performance report, Form F45-3 for the 2nd quarter of 2010 and
the 6 months ended June 30, 2010 (a copy in Thai and English)
Please be informed accordingly.
Sincerely yours,
(Mr. Aloke Lohia)
Group Chief Executive Officer
Company Secretary
Tel: +66 (0) 2661-6661
Fax: +66 (0) 2661-6664
-1-
INDORAMA VENTURES PUBLIC COMPANY LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
FOR THE PERIOD OF 2Q 2010 AND 6 MONTHS ENDED JUNE 30, 2010 (Consolidated)
The management is pleased to announce the best quarterly and half yearly
earnings in the company's history. The record earnings are driven by the
strong fundamentals of the Polyester Value Chain and our portfolio of
businesses in this chain are well diversified over 3 Continents. The depth of
our integration and our scale allows for very competitive cost structure. The
IVL model well demonstrates the stability it brings to our consolidated
business in these challenging times of volatile petrochemical prices and global
currencies.
Indorama Ventures PCL (SET: "IVL") announced Net Profit after tax and minority
of US$ 111 million (Baht 3,619 million) for the 6 months ended 30th June 2010
and US$ 65 million (Baht 2,089 million) for Q2, 2010.Baht continued to
strengthen in 2010 while the Euro currency was significantly weak throughout
2010 ending 17% cheaper as on 30th June 2010 over a year earlier. The US
Dollar ended 5% cheaper over the same period over the Thai Currency.
Key Financial Information
USD in Millions 2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
Exchange Rate Baht vs US$ 32.44 32.37 33.98 0% -5% 32.44 33.98 -5%
Exchange Rate Baht vs Euro 39.59 43.41 47.98 -9% -17% 39.59 47.98 -17%
Consolidated Sales 737 733 608 1% 21% 1,469 1,105 33%
PET resins 456 434 341 5% 34% 889 625 42%
Polyester & wool 100 105 86 -4% 17% 205 139 48%
PTA 180 194 181 -7% 0% 375 341 10%
Consolidated EBITDA 89 92 100 -2% -11% 181 179 1%
PET resins 54 51 56 6% -3% 105 101 4%
Polyester & wool 11 13 10 -11% 17% 24 17 41%
PTA 22 29 35 -24% -37% 51 60 -16%
Net profit after tax
and minority 65 47 51 39% 27% 111 82 35%
CAPEX 55 13 23 338% 139% 68 58 17%
Net Debt 1,019 955 1,137 7% -10% 1,019 1,137 -10%
Net Operating Debt
to EBITDA 2.6 2.4 2.5 8% 6% 2.6 2.8 -7%
Interest Coverage 10.0 9.3 8.7 -7% -15% 9.6 7.2 33%
2Q 2010 includes the acquisition of a Utility Plant in Rotterdam, Netherlands
resulting in a fair value adjustment 'Gain on a bargain purchase or Negative
Goodwill' of Baht 563 million or US$ 17 million.
Segment Results 2Q 2010 versus 2Q 2009
PET - Sales revenue increased by 34 percent in Dollar terms due to higher
sales volume and higher selling prices, but an unfavorable shift in Euro
currency had a muting effect. The higher sales volume was attributed primarily
to startup of AlphaPet line 2 in USA as well as to improved customer demand
due to a seasonal rebound globally. The higher selling prices were in response
to higher raw material and energy costs. Margins in USA in 2010 have remained
under pressure due to startup of new capacity and offset the margin increase
achieved in Asia. European Margins were higher in Euro due to reduced imports
led by imposition of provisional duties but were partly offset in Dollar terms
due to the weakness in Euro. The PET segment achieved 4 percent growth in
6month 2010 Operating EBITDA in Dollar terms over same period last year.
Polyester fibers and Wool yarns - Indorama Polyester Industries PCL, Rayong
formerly called Tuntex has made a complete transformation in 2010 and the
plant is fully functional. 1 of our 2 Polyester fibers plant
had scheduled maintenance shutdown in June leading to reduction in sales
volume. Despite, 2Q Sales revenue increased by 17 percent in Dollar terms from
higher selling prices, particularly for polyester fiber product lines. The
higher selling prices were in response to higher raw material and energy
costs, which
-2-
were adequately passed through. The market demand in 2010 has been very strong
due to cost pressures on Chinese manufacturers, which allowed margin
expansions that were also helped by a favorable shift in product mix. The
segment achieved 41 percent growth in 6month 2010 Operating EBITDA in Dollar
terms over same period last year.
PTA - Sales revenue decreased by 4 percent due primarily to lower sales
volume. 2 of our 3 PTA plants had scheduled maintenance shutdowns in June
leading to reduction in sales. Underlying demand was strong but supply chain
management and volatile Paraxylene price movements during the quarter when
spot prices of PX fell sharply in May and June caused inventory write-downs,
which negatively impacted 2Q margins and Operating EBITDA. The scheduled
shutdowns also lead to higher operating costs.The segment suffered 16% percent
reduction in 6month 2010 Operating EBITDA in Dollar terms over same
period last year.
Cash Flow
IVL generated $76 million of cash from operating activities during 1H 2010
compared to US$ 116 million in 1H last year. 1H 2010 witnessed cash outflow
for working capital on higher volumes and prices. 1H 2010 also witnessed
completion of the current phase of expansions led by the green field, state of
art PET plant in USA and the acquisition of the Utility plant in Rotterdam,
Netherlands. Capital Expenditures in 1H 2010 was US$ 68 million. The Company
paid US$ 44 million as dividend in May 2010.
Net profit after tax and minority
IVL witnessed strong sales growth in its downstream businesses of PET and
Polyester in 1H 2010 that led to a Sales growth of 33 percent in Dollar terms.
The Net Income after tax and minority was US$ 111 million in 1H 2010, a
growth of 35 percent over the same period last year including the fair value
adjustment, Negative Goodwill of US$ 17 million on acquisition of the Dutch
Utility Plant. The ROE achieved in 2Q 2010 is 35 percent compared to 30
percent achieved in 1Q 2010
Financial Status and Ratios
IVL Net Debt stands at US$ 1,019 million as at end of 1H 2010, which is 10
percent lower than same time last year. The Net Gearing ration stands at 55
percent at end 1H 2010 compared to 65 percent same time last year. IVL ROCE
stands at 14.8 percent in 2Q 2010 against 15.7 percent in 1Q 2010.
Outlook
Our first half results came in line of our expectations and our Integrated
Polyester Chain businesses model allows for absorbing the volatility that is
generally present in Petrochemicals, also perhaps because our customers are in
the Consumer Staple business. This gives us confidence heading into the second
half of the year. We expect to continue to benefit from the recovery in Europe
and USA. The PTA and Polyester fibers business is expected to be back on track
in the 3rd Quarter after scheduled shutdowns in 2Q. The Italian PTA and PET
J/V is in our fold and IVL experts are working hard to turn this business
around over the next 4 quarters. The management continues to look at various
growth options in all parts of the world and intends to secure a deal each in
North America, Europe and in Asia during 2H, 2010. IVL has recently completed
its strategy setting for up to year 2014 which envisages growth in all
segments of IVL.
Projects update
Completion of growth projects initiated in year 2007 with the start up of
commercial operations of Line 2 at AlphaPet in the beginning of June, 2010.
Line 1 had started operations in October 2009 and is now operating at full
utilization. AlphaPet is located in Decatur, Alabama, USA, with the installed
PET capacity of 432,000 tons a year. It employs state-of-the-art Melt-To-Resin
technology which has a number of advantages over conventional PET technologies
including significant capital and operational savings,reduced energy
consumption and a smaller environmental footprint. The first full year impact
of volume from AlphaPet will be in year 2011.
In May, 2010 Indorama Holdings Rotterdam NV, a subsidiary of IVL, completed
the acquisition of a utility generation business in Rotterdam, Netherlands
which was previously owned and operated by Air Products and Eneco. The utility
business purchased is located on the site of PTA and PET plant owned and
operated by the IVL subsidiaries. The net assets were acquired for a cash
consideration of Euro 24.6 million or equivalent Baht 1,049 million. The
acquisition qualifies for treatment as a business combination in
accordance with TAS 43 - Business Combinations, which requires that the net
assets acquired and
-3-
liabilities assumed be recorded at their fair values. A firm of independent
appraisers has provisionally determined the fair values of the acquired
assets, and the carrying value of the assets acquired and liabilities assumed
were recorded accordingly. IVL on a consolidated basis has recorded a net gain
or negative goodwill of Baht 563 million (around Euro 14 million) on asset
appraisal of acquired utility assets in Rotterdam, Netherlands. The net gain
on asset appraisal has been recorded as "Gain on a bargain
purchase" in the statement of Income for Q2, 2010 and 6M, 2010. The gain on a
bargain purchase is a non-cash item for which depreciation will be provided
over the estimated remaining life of about 20 years.
In May, 2010, the IVL Board of Directors approved expansion of PET production
at the site of its existing plant, owned and operated by its subsidiary
Indorama Polymers Rotterdam BV. It will add a new production
line with an annual capacity of PET resin of 190,000 tons thus bringing the
total capacity at the site to 390,000 tons. The expansion is expected to be
completed and start operations in quarter 1, 2012. The new plant will generate
employment. The proposed expansion is being taken up to increase market share
in Europe, to fully integrate with the PTA capacity of 350,000 tons and
utilities at the same location and benefit from economies of scale. It is
expected to be value accretive to earnings and will not have a material impact
on net gearing.
Effective July 1, 2010, UAB Ottana Polimeri Europe has completed the business
acquisition of a PTA and PET facility from Equipolymers S.R.L. through the
acquisition of 100% of the outstanding shares of Ottana Polimeri S.R.L., a
registered company in Italy, for a cash consideration of Euro 100,000 or Baht
3.96 million. The plant capacity for PTA plant is 192,000 tons, and for PET
plant is 150,000 tons. The transaction is expected to be value accretive to
earnings, increase book value per share and will not impact net gearing. UAB
Ottana Polimeri Europe, registered in Lithuania, was set-up as a 50:50 joint
venture between IVL and PCH Holdings S.R.L. for the purpose of acquisition.
In August, 2010, the IVL Board of Directors approved implementation of a new
PET plant by its subsidiary Indorama Polymers PCL. "IRP". IRP through a new
wholly owned subsidiary will be setting up a 75,000 tons per annum solid state
polymerization "SSP" plant to produce PET at Port Harcourt, Nigeria. This is
the first PET investment of IVL in Africa and thus establishing its foothold
in the 450,000 tons per annum market. Currently, there is only one producer of
PET in Africa. The plant is expected to complete and start commercial
operations in quarter 3, 2011. It is expected to be value accretive to
earnings and will not have a material impact on net gearing.
In August, 2010, the IVL Board of Directors approved implementation of a PET
Recycling project or Flake to Resins with a capacity of 36,000 tpa in AlphaPet
Inc., USA. The project is in line with demand from branded beverage company's
in the fast moving consumer goods sector. The process and technology is
approved and availability of clean flakes has been tied-up from within a close
proximity of the plant. The project is expected to complete and start-up in
quarter 4, 2011. It is expected to be value accretive to earnings and
will not have a material impact on net gearing. Also, the project meets CSR
objectives of IVL to protect environment and to promote recycling.
In August, 2010, the IVL Board of Directors approved implementation of a 2 MW
Solar Power Project in Lopburi, Thailand. The electricity generated will be
supplied to the PEA grid and falls in the Very SmallPower Producer Program
"VSPP" under which will avail long term incentives on investment in renewable
energy. Thailand with very good solar radiation provides opportunity to tap
solar energy, a renewable energy source. The project will be located at our
existing site and will utilize for productive use surplus vacant land which
falls in the Green Zone. The project will avail BOI promotion privileges for
exemption of corporate tax, custom duty and other incentives. The project is
expected to complete and start-up in quarter 2, 2011. Also, the project meets
CSR objectives of IVL to protect environment, reduce carbon footprint and
community development.
Important Note: The Polyester Chain businesses are generally traded in US
dollars and therefore IVL believes in helping its reader with translated US
Dollar figures. IVL reporting currency is in Thai Baht and the accompanying
pages are an integral part of this report.The accompanying pages report the
Reviewed Thai Baht results of 2Q 2010 and its translation in US Dollars at
average exchange rates and closing exchange rates where applicable. Readers
should rely on the Thai Baht results only.
Forward-Looking Statements: This earnings release includes forward-looking
statements concerning current expectations for demand for the company's
products, implementation and impact of previously announced growth
initiatives, Such expectations are based upon certain preliminary information,
internal estimates, and management assumptions, expectations, and plans, and
are subject to a number of risks and uncertainties inherent in projecting
future conditions, events, and results. Actual results could differ materially
from expectations expressed in the forward-looking statements if one or more
of the underlying assumptions or expectations prove to be
inaccurate or are unrealized.
-4-
FINANCIAL INFORMATION
- IVL consolidated tables
- Business segment tables
- IVL consolidated balance sheet and statement of income
-5-
IVL CONSOLIDATED
Table 1
IVL : CASH FLOW
6M10 vs.
Baht in millions 6M10 6M09 6M09
EBITDA 5,904 6,260 -6%
Net working capital and others (2,616) (1,514) 73%
Net financial expenses (655) (857) -24%
Income tax (140) (14) 900%
Free cash flow before Capex 2,493 3,875 -36%
Capital expenditures (1,163) (2,033) -43%
Net (acquisitions) disposals of subsidiaries
(1,049) 0 n/a
Free cash flow after Capex 281 1,842 -85%
Dividends (1,448) (139) 942%
Proceeds from issues of shares 3,825 0 n/a
Changes in net debt (2,658) (1,703) 56%
Note: The consolidated financials are based upon elimination of intra-company
(or intra business segment) transactions reason which the total of each
segment may not tally with consolidated financials.
Table 2
IVL : FINANCIAL RATIOS
2Q10 1Q10 2Q09
Current ratio (times) 1.0 1.0 0.8
Net gearing ratio (%) 55% 53% 65%
* Net operating gearing ratio (%) 53% 51% 62%
Interest coverage ratio (times) 10.0 9.3 8.7
** ROE (%) 34.9% 29.7% 48.8%
*** ROCE (%) 14.8% 15.7% 20.5%
* Based on net operating debt which is net debt less debt for capex and
investments not generating revenue and earnings
** Net profit after minority to average total equity attributable to
shareholders
*** Operating income to average capital employed (net operating debt plus
total shareholder's equity)
-6-
PET
Table 3
PET : CAPACITY AND UTILISATION (%)
2Q10vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Production capacity (in Tonnes)
336,192 316,110 238,844 6% 41% 652,301 475,063 37%
Production volumes (in Tonnes)
320,878 297,993 255,496 8% 26% 618,872 497,625 24%
Utilisation rate (%)
95% 94% 107% 95% 105%
*Capacity based on available days in the quarter for production. 2Q10, 1Q10
and 6M10 include a line switched from Polyester fibers to PET
Table 4
PET : REVENUES
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
Total revenues
Baht in millions
14,771 14,258 11,800 4% 25% 29,029 21,853 33%
USD in millions
456 434 341 5% 34% 889 625 42%
Growth in Baht revenues from:
Volume growth 0% 20% 23%
Price movement 8% 13% 15%
Exchange rate movement -5% -9% -6%
Proportion of revenues by geographic
Thailand 8% 6% 5% 7% 5%
Asia (excluding Thailand)
4% 4% 3% 4% 3%
North America
34% 31% 32% 32% 30%
Europe
46% 52% 56% 49% 57%
Rest of the World
7% 7% 5% 7% 6%
Table 5
PET : OPERATING EBITDA AND MARGIN
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Operating EBITDA
Baht in millions
1,759 1,677 1,937 5% -9% 3,434 3,548 -3%
USD in millions
54 51 56 6% -3% 105 101 4%
Margin (%)
11.9% 11.8% 16.4% 11.88% 16.2%
* Based on pro-rata allocation of earnings of PTA business calculated on
intra-group sales to PET and Polyester fibers
-7-
POLYESTER & WOOL
Table 6
POLYESTER & WOOL : CAPACITY AND UTILIZATION (%)
POLYESTER FIBERS & YARNS
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Production capacity (in Tonnes)
61,032 60,362 87,958 1% -31% 121,394 174,950 -31%
**Production volumes (in Tonnes)
64,618 68,136 81,781 -5% -21% 132,754 146,136 -9%
Utilisation rate (%)
106% 113% 93% 109% 84%
WOOL YARNS
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Production capacity (in Tonnes)
1,471 1,455 1,471 1% 0% 2,926 2,926 0%
**Production volumes (in Tonnes)
1,162 1,169 775 -1% 50% 2,331 1,529 52%
Utilisation rate (%)
79% 80% 53% 80% 52%
*Capacity based on available days in the quarter for production. 2Q10, 1Q10
and 6M10 exclude a line switched from Polyester fibers to PET
**Production volumes based on equivalent production
Table 7
POLYESTER & WOOL : REVENUES
2Q10vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
Total revenues
Baht in millions
3,254 3,454 2,975 -6% 9% 6,707 4,867 38%
USD in millions
100 105 86 -4% 17% 205 139 48%
Growth in Baht revenues from:
Volume growth -10% -19% 1%
Price movement 7% 41% 42%
Exchange rate movement -3% 6% -5%
Proportion of revenues by geographic
Thailand
(more)
August 11, 2010
The President
The Stock Exchange of Thailand
Subject: Submission of Reviewed Financial Statements of Indorama Ventures
Public Company for the 2nd quarter of 2010 and the 6 months ended June 30,
2010 and the Management's Discussion and Analysis (MD&A)
We are pleased to submit:
1. A copy of the Consolidated and Company only Reviewed Financial Statements
for the 2nd quarter of 2010 and the 6 months ended June 30, 2010 (a copy in
Thai and English)
2. Management's Discussion and Analysis (MD&A) for the 2nd quarter of 2010 and
the 6 months ended June 30, 2010 (a copy in Thai and English)
3. Company's performance report, Form F45-3 for the 2nd quarter of 2010 and
the 6 months ended June 30, 2010 (a copy in Thai and English)
Please be informed accordingly.
Sincerely yours,
(Mr. Aloke Lohia)
Group Chief Executive Officer
Company Secretary
Tel: +66 (0) 2661-6661
Fax: +66 (0) 2661-6664
-1-
INDORAMA VENTURES PUBLIC COMPANY LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
FOR THE PERIOD OF 2Q 2010 AND 6 MONTHS ENDED JUNE 30, 2010 (Consolidated)
The management is pleased to announce the best quarterly and half yearly
earnings in the company's history. The record earnings are driven by the
strong fundamentals of the Polyester Value Chain and our portfolio of
businesses in this chain are well diversified over 3 Continents. The depth of
our integration and our scale allows for very competitive cost structure. The
IVL model well demonstrates the stability it brings to our consolidated
business in these challenging times of volatile petrochemical prices and global
currencies.
Indorama Ventures PCL (SET: "IVL") announced Net Profit after tax and minority
of US$ 111 million (Baht 3,619 million) for the 6 months ended 30th June 2010
and US$ 65 million (Baht 2,089 million) for Q2, 2010.Baht continued to
strengthen in 2010 while the Euro currency was significantly weak throughout
2010 ending 17% cheaper as on 30th June 2010 over a year earlier. The US
Dollar ended 5% cheaper over the same period over the Thai Currency.
Key Financial Information
USD in Millions 2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
Exchange Rate Baht vs US$ 32.44 32.37 33.98 0% -5% 32.44 33.98 -5%
Exchange Rate Baht vs Euro 39.59 43.41 47.98 -9% -17% 39.59 47.98 -17%
Consolidated Sales 737 733 608 1% 21% 1,469 1,105 33%
PET resins 456 434 341 5% 34% 889 625 42%
Polyester & wool 100 105 86 -4% 17% 205 139 48%
PTA 180 194 181 -7% 0% 375 341 10%
Consolidated EBITDA 89 92 100 -2% -11% 181 179 1%
PET resins 54 51 56 6% -3% 105 101 4%
Polyester & wool 11 13 10 -11% 17% 24 17 41%
PTA 22 29 35 -24% -37% 51 60 -16%
Net profit after tax
and minority 65 47 51 39% 27% 111 82 35%
CAPEX 55 13 23 338% 139% 68 58 17%
Net Debt 1,019 955 1,137 7% -10% 1,019 1,137 -10%
Net Operating Debt
to EBITDA 2.6 2.4 2.5 8% 6% 2.6 2.8 -7%
Interest Coverage 10.0 9.3 8.7 -7% -15% 9.6 7.2 33%
2Q 2010 includes the acquisition of a Utility Plant in Rotterdam, Netherlands
resulting in a fair value adjustment 'Gain on a bargain purchase or Negative
Goodwill' of Baht 563 million or US$ 17 million.
Segment Results 2Q 2010 versus 2Q 2009
PET - Sales revenue increased by 34 percent in Dollar terms due to higher
sales volume and higher selling prices, but an unfavorable shift in Euro
currency had a muting effect. The higher sales volume was attributed primarily
to startup of AlphaPet line 2 in USA as well as to improved customer demand
due to a seasonal rebound globally. The higher selling prices were in response
to higher raw material and energy costs. Margins in USA in 2010 have remained
under pressure due to startup of new capacity and offset the margin increase
achieved in Asia. European Margins were higher in Euro due to reduced imports
led by imposition of provisional duties but were partly offset in Dollar terms
due to the weakness in Euro. The PET segment achieved 4 percent growth in
6month 2010 Operating EBITDA in Dollar terms over same period last year.
Polyester fibers and Wool yarns - Indorama Polyester Industries PCL, Rayong
formerly called Tuntex has made a complete transformation in 2010 and the
plant is fully functional. 1 of our 2 Polyester fibers plant
had scheduled maintenance shutdown in June leading to reduction in sales
volume. Despite, 2Q Sales revenue increased by 17 percent in Dollar terms from
higher selling prices, particularly for polyester fiber product lines. The
higher selling prices were in response to higher raw material and energy
costs, which
-2-
were adequately passed through. The market demand in 2010 has been very strong
due to cost pressures on Chinese manufacturers, which allowed margin
expansions that were also helped by a favorable shift in product mix. The
segment achieved 41 percent growth in 6month 2010 Operating EBITDA in Dollar
terms over same period last year.
PTA - Sales revenue decreased by 4 percent due primarily to lower sales
volume. 2 of our 3 PTA plants had scheduled maintenance shutdowns in June
leading to reduction in sales. Underlying demand was strong but supply chain
management and volatile Paraxylene price movements during the quarter when
spot prices of PX fell sharply in May and June caused inventory write-downs,
which negatively impacted 2Q margins and Operating EBITDA. The scheduled
shutdowns also lead to higher operating costs.The segment suffered 16% percent
reduction in 6month 2010 Operating EBITDA in Dollar terms over same
period last year.
Cash Flow
IVL generated $76 million of cash from operating activities during 1H 2010
compared to US$ 116 million in 1H last year. 1H 2010 witnessed cash outflow
for working capital on higher volumes and prices. 1H 2010 also witnessed
completion of the current phase of expansions led by the green field, state of
art PET plant in USA and the acquisition of the Utility plant in Rotterdam,
Netherlands. Capital Expenditures in 1H 2010 was US$ 68 million. The Company
paid US$ 44 million as dividend in May 2010.
Net profit after tax and minority
IVL witnessed strong sales growth in its downstream businesses of PET and
Polyester in 1H 2010 that led to a Sales growth of 33 percent in Dollar terms.
The Net Income after tax and minority was US$ 111 million in 1H 2010, a
growth of 35 percent over the same period last year including the fair value
adjustment, Negative Goodwill of US$ 17 million on acquisition of the Dutch
Utility Plant. The ROE achieved in 2Q 2010 is 35 percent compared to 30
percent achieved in 1Q 2010
Financial Status and Ratios
IVL Net Debt stands at US$ 1,019 million as at end of 1H 2010, which is 10
percent lower than same time last year. The Net Gearing ration stands at 55
percent at end 1H 2010 compared to 65 percent same time last year. IVL ROCE
stands at 14.8 percent in 2Q 2010 against 15.7 percent in 1Q 2010.
Outlook
Our first half results came in line of our expectations and our Integrated
Polyester Chain businesses model allows for absorbing the volatility that is
generally present in Petrochemicals, also perhaps because our customers are in
the Consumer Staple business. This gives us confidence heading into the second
half of the year. We expect to continue to benefit from the recovery in Europe
and USA. The PTA and Polyester fibers business is expected to be back on track
in the 3rd Quarter after scheduled shutdowns in 2Q. The Italian PTA and PET
J/V is in our fold and IVL experts are working hard to turn this business
around over the next 4 quarters. The management continues to look at various
growth options in all parts of the world and intends to secure a deal each in
North America, Europe and in Asia during 2H, 2010. IVL has recently completed
its strategy setting for up to year 2014 which envisages growth in all
segments of IVL.
Projects update
Completion of growth projects initiated in year 2007 with the start up of
commercial operations of Line 2 at AlphaPet in the beginning of June, 2010.
Line 1 had started operations in October 2009 and is now operating at full
utilization. AlphaPet is located in Decatur, Alabama, USA, with the installed
PET capacity of 432,000 tons a year. It employs state-of-the-art Melt-To-Resin
technology which has a number of advantages over conventional PET technologies
including significant capital and operational savings,reduced energy
consumption and a smaller environmental footprint. The first full year impact
of volume from AlphaPet will be in year 2011.
In May, 2010 Indorama Holdings Rotterdam NV, a subsidiary of IVL, completed
the acquisition of a utility generation business in Rotterdam, Netherlands
which was previously owned and operated by Air Products and Eneco. The utility
business purchased is located on the site of PTA and PET plant owned and
operated by the IVL subsidiaries. The net assets were acquired for a cash
consideration of Euro 24.6 million or equivalent Baht 1,049 million. The
acquisition qualifies for treatment as a business combination in
accordance with TAS 43 - Business Combinations, which requires that the net
assets acquired and
-3-
liabilities assumed be recorded at their fair values. A firm of independent
appraisers has provisionally determined the fair values of the acquired
assets, and the carrying value of the assets acquired and liabilities assumed
were recorded accordingly. IVL on a consolidated basis has recorded a net gain
or negative goodwill of Baht 563 million (around Euro 14 million) on asset
appraisal of acquired utility assets in Rotterdam, Netherlands. The net gain
on asset appraisal has been recorded as "Gain on a bargain
purchase" in the statement of Income for Q2, 2010 and 6M, 2010. The gain on a
bargain purchase is a non-cash item for which depreciation will be provided
over the estimated remaining life of about 20 years.
In May, 2010, the IVL Board of Directors approved expansion of PET production
at the site of its existing plant, owned and operated by its subsidiary
Indorama Polymers Rotterdam BV. It will add a new production
line with an annual capacity of PET resin of 190,000 tons thus bringing the
total capacity at the site to 390,000 tons. The expansion is expected to be
completed and start operations in quarter 1, 2012. The new plant will generate
employment. The proposed expansion is being taken up to increase market share
in Europe, to fully integrate with the PTA capacity of 350,000 tons and
utilities at the same location and benefit from economies of scale. It is
expected to be value accretive to earnings and will not have a material impact
on net gearing.
Effective July 1, 2010, UAB Ottana Polimeri Europe has completed the business
acquisition of a PTA and PET facility from Equipolymers S.R.L. through the
acquisition of 100% of the outstanding shares of Ottana Polimeri S.R.L., a
registered company in Italy, for a cash consideration of Euro 100,000 or Baht
3.96 million. The plant capacity for PTA plant is 192,000 tons, and for PET
plant is 150,000 tons. The transaction is expected to be value accretive to
earnings, increase book value per share and will not impact net gearing. UAB
Ottana Polimeri Europe, registered in Lithuania, was set-up as a 50:50 joint
venture between IVL and PCH Holdings S.R.L. for the purpose of acquisition.
In August, 2010, the IVL Board of Directors approved implementation of a new
PET plant by its subsidiary Indorama Polymers PCL. "IRP". IRP through a new
wholly owned subsidiary will be setting up a 75,000 tons per annum solid state
polymerization "SSP" plant to produce PET at Port Harcourt, Nigeria. This is
the first PET investment of IVL in Africa and thus establishing its foothold
in the 450,000 tons per annum market. Currently, there is only one producer of
PET in Africa. The plant is expected to complete and start commercial
operations in quarter 3, 2011. It is expected to be value accretive to
earnings and will not have a material impact on net gearing.
In August, 2010, the IVL Board of Directors approved implementation of a PET
Recycling project or Flake to Resins with a capacity of 36,000 tpa in AlphaPet
Inc., USA. The project is in line with demand from branded beverage company's
in the fast moving consumer goods sector. The process and technology is
approved and availability of clean flakes has been tied-up from within a close
proximity of the plant. The project is expected to complete and start-up in
quarter 4, 2011. It is expected to be value accretive to earnings and
will not have a material impact on net gearing. Also, the project meets CSR
objectives of IVL to protect environment and to promote recycling.
In August, 2010, the IVL Board of Directors approved implementation of a 2 MW
Solar Power Project in Lopburi, Thailand. The electricity generated will be
supplied to the PEA grid and falls in the Very SmallPower Producer Program
"VSPP" under which will avail long term incentives on investment in renewable
energy. Thailand with very good solar radiation provides opportunity to tap
solar energy, a renewable energy source. The project will be located at our
existing site and will utilize for productive use surplus vacant land which
falls in the Green Zone. The project will avail BOI promotion privileges for
exemption of corporate tax, custom duty and other incentives. The project is
expected to complete and start-up in quarter 2, 2011. Also, the project meets
CSR objectives of IVL to protect environment, reduce carbon footprint and
community development.
Important Note: The Polyester Chain businesses are generally traded in US
dollars and therefore IVL believes in helping its reader with translated US
Dollar figures. IVL reporting currency is in Thai Baht and the accompanying
pages are an integral part of this report.The accompanying pages report the
Reviewed Thai Baht results of 2Q 2010 and its translation in US Dollars at
average exchange rates and closing exchange rates where applicable. Readers
should rely on the Thai Baht results only.
Forward-Looking Statements: This earnings release includes forward-looking
statements concerning current expectations for demand for the company's
products, implementation and impact of previously announced growth
initiatives, Such expectations are based upon certain preliminary information,
internal estimates, and management assumptions, expectations, and plans, and
are subject to a number of risks and uncertainties inherent in projecting
future conditions, events, and results. Actual results could differ materially
from expectations expressed in the forward-looking statements if one or more
of the underlying assumptions or expectations prove to be
inaccurate or are unrealized.
-4-
FINANCIAL INFORMATION
- IVL consolidated tables
- Business segment tables
- IVL consolidated balance sheet and statement of income
-5-
IVL CONSOLIDATED
Table 1
IVL : CASH FLOW
6M10 vs.
Baht in millions 6M10 6M09 6M09
EBITDA 5,904 6,260 -6%
Net working capital and others (2,616) (1,514) 73%
Net financial expenses (655) (857) -24%
Income tax (140) (14) 900%
Free cash flow before Capex 2,493 3,875 -36%
Capital expenditures (1,163) (2,033) -43%
Net (acquisitions) disposals of subsidiaries
(1,049) 0 n/a
Free cash flow after Capex 281 1,842 -85%
Dividends (1,448) (139) 942%
Proceeds from issues of shares 3,825 0 n/a
Changes in net debt (2,658) (1,703) 56%
Note: The consolidated financials are based upon elimination of intra-company
(or intra business segment) transactions reason which the total of each
segment may not tally with consolidated financials.
Table 2
IVL : FINANCIAL RATIOS
2Q10 1Q10 2Q09
Current ratio (times) 1.0 1.0 0.8
Net gearing ratio (%) 55% 53% 65%
* Net operating gearing ratio (%) 53% 51% 62%
Interest coverage ratio (times) 10.0 9.3 8.7
** ROE (%) 34.9% 29.7% 48.8%
*** ROCE (%) 14.8% 15.7% 20.5%
* Based on net operating debt which is net debt less debt for capex and
investments not generating revenue and earnings
** Net profit after minority to average total equity attributable to
shareholders
*** Operating income to average capital employed (net operating debt plus
total shareholder's equity)
-6-
PET
Table 3
PET : CAPACITY AND UTILISATION (%)
2Q10vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Production capacity (in Tonnes)
336,192 316,110 238,844 6% 41% 652,301 475,063 37%
Production volumes (in Tonnes)
320,878 297,993 255,496 8% 26% 618,872 497,625 24%
Utilisation rate (%)
95% 94% 107% 95% 105%
*Capacity based on available days in the quarter for production. 2Q10, 1Q10
and 6M10 include a line switched from Polyester fibers to PET
Table 4
PET : REVENUES
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
Total revenues
Baht in millions
14,771 14,258 11,800 4% 25% 29,029 21,853 33%
USD in millions
456 434 341 5% 34% 889 625 42%
Growth in Baht revenues from:
Volume growth 0% 20% 23%
Price movement 8% 13% 15%
Exchange rate movement -5% -9% -6%
Proportion of revenues by geographic
Thailand 8% 6% 5% 7% 5%
Asia (excluding Thailand)
4% 4% 3% 4% 3%
North America
34% 31% 32% 32% 30%
Europe
46% 52% 56% 49% 57%
Rest of the World
7% 7% 5% 7% 6%
Table 5
PET : OPERATING EBITDA AND MARGIN
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Operating EBITDA
Baht in millions
1,759 1,677 1,937 5% -9% 3,434 3,548 -3%
USD in millions
54 51 56 6% -3% 105 101 4%
Margin (%)
11.9% 11.8% 16.4% 11.88% 16.2%
* Based on pro-rata allocation of earnings of PTA business calculated on
intra-group sales to PET and Polyester fibers
-7-
POLYESTER & WOOL
Table 6
POLYESTER & WOOL : CAPACITY AND UTILIZATION (%)
POLYESTER FIBERS & YARNS
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Production capacity (in Tonnes)
61,032 60,362 87,958 1% -31% 121,394 174,950 -31%
**Production volumes (in Tonnes)
64,618 68,136 81,781 -5% -21% 132,754 146,136 -9%
Utilisation rate (%)
106% 113% 93% 109% 84%
WOOL YARNS
2Q10 vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
*Production capacity (in Tonnes)
1,471 1,455 1,471 1% 0% 2,926 2,926 0%
**Production volumes (in Tonnes)
1,162 1,169 775 -1% 50% 2,331 1,529 52%
Utilisation rate (%)
79% 80% 53% 80% 52%
*Capacity based on available days in the quarter for production. 2Q10, 1Q10
and 6M10 exclude a line switched from Polyester fibers to PET
**Production volumes based on equivalent production
Table 7
POLYESTER & WOOL : REVENUES
2Q10vs. 6M10 vs.
2Q10 1Q10 2Q09 1Q10 2Q09 6M10 6M09 6M09
Total revenues
Baht in millions
3,254 3,454 2,975 -6% 9% 6,707 4,867 38%
USD in millions
100 105 86 -4% 17% 205 139 48%
Growth in Baht revenues from:
Volume growth -10% -19% 1%
Price movement 7% 41% 42%
Exchange rate movement -3% 6% -5%
Proportion of revenues by geographic
Thailand
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