Indorama Ventures Public Company Limited (IVL) has reported its 2Q20 consolidated financial statement through the Stock Exchange of Thailand as follows;
IVL achieved a core EBITDA of US$305M and an operating cash flow of US$300M. Core net profit grew to US$82M compared with US$50M in 1Q2020. Liquidity in the company remains high with cash and cash equivalents of US$0.8B and unutilized credit lines of US$ 2.0B. With Core EPS of THB0.43 up from THB0.25 per share in the first quarter.
The second quarter performance was driven by strong PET demand, higher Integrated PET spreads, lower conversion costs, higher demand in the hygiene fibers segment and normalization of 1Q20’s PO/MTBE shutdown.
Results in 2Q20 were adversely impacted due to lower crude oil price impacting margins of MTBE and Integrated EG as shale gas lost its advantage against Naphtha-based producers. The Mobility & Lifestyle fibers segment were also severely impacted due to lockdowns, with lower consumer spending on durables and travel restrictions. Around 80% of IVL’s products cater to non-durable sectors where the demand impact caused by COVID-19 and margin meltdown due to crude collapse was not felt.
IVL’s portfolio servicing end-markets of food, beverages, personal care and hygiene were positively influenced during the pandemic. IVL’s products that are used for electronics and films for screens were steady. The automotive and oil related segments saw severe drops in off-take and for the first time saw the shutdown of the retail segment, which impacted IVL apparel segment.
The acquisition of Spindletop and startup of Lake Charles cracker did not provide IVL the typical earnings that IVL had built into business case but the strong balance sheet and the strategic fit of these gas-based olefin businesses serving the MEG integration and, importantly, the diversification into growth businesses such as surfactants, green fuels and urethanes is reaffirmed.
With the opening of the global economy, easing of lockdowns and improvement in crude oil prices, the company expects to see improved performance of the laggards of 2Q20. IVL’s investments over the last decade in leading global businesses with intent to grow and diversify the portfolio for long-term growth has yielded above average returns over the cycle, while IVL remains focused on supporting, supplementing and leveraging the flagship business of recyclable PET.
Mr. Aloke Lohia, Group CEO of Indorama Ventures said, “In these unprecedented times of economic and geopolitical volatilities, we are satisfied that around 80% of our business portfolio servers non-durables where demand was healthy and actually contributed to margin growth and strong liquidity. This is evident in our sales volumes and strong cash flows. We have seen early signs of recovery on the other 20% of our business with the easing of lockdowns and improvement in oil prices. The opportunities are immense and we look forward to leveraging our unique geographical and business portfolio. We remain steadfast on our five strategic priorities – cost transformation (saving us $350m by 2023, achieved $44m in 1H20), business full potential, adjacent growth opportunities, recycling leadership and people/leadership development.
As we look ahead to the second half of 2020, we feel confident in our business model as our regionalized footprint, coupled with the inelastic nature of our products, allows us to continue to sell at all times and create a steady stream of operating cash flows.”