For chemical producer Indorama Ventures Public Company Limited (IVL), 2Q23 was a - modest - improvement over its first quarter. Nonetheless, the continued weak operating environment left its mark: reported EBITDA for the quarter was $321 million, and, while an increase of 7% quarter on quarter, this represented a year-on-year decline of 68%. Sales volumes remained resilient, rising 4% quarter-on-quarter, amid continued destocking in the global chemicals industry from its peak in the fourth quarter of 2022.
The company noted that with China boosting exports to offset lower domestic demand, global margins were down as the market became sated with cheap commodity materials.
Indorama is therefore implementing a range of different measures in repsonse. These include intensifying its efforts to reduce working capital and capex targeting $500 million of cash savings this year, optimising the company’s European manufacturing footprint, and continued focus on its efficiencies and its business transformation project, Project Olympus, launched in 2020. The company is also focusing on further digitalisation and organisational enhancement.
Going forward, Indorama expects volumes to improve in the second half of the year. The benefits will start to be felt of the implemented measures, while the outlook for the industry will gradually improve.
The company’s largest business segment, Combined PET, posted a 37% rise in EBITDA over the same quarter last year. Sales volumes are expected to grow in the coming six months as manufacturing is optimised in Europe and expansion projects ramp up in India.
Impacted by lower margins in the lifestyle market and weak demand for hygiene products in Europe, the Fibres segment achieved a reported EBITDA of $20 million, a decrease of 37% compared to 2Q22, while the Integrated Oxides and Derivatives (IOD) segment posted a quarter-on-quarter 27% decline in reported EBITDA to $94 million.
However, according to DK Agarwal, deputy group CEO of Indorama Ventures, the businesses are structurally well positioned and able to withstand the current conditions.
“We are using the slowdown to optimise our asset footprint and drive operational excellence to remain in the first quartile cost position in the markets we serve. […] We see mid-cycle returns in 2024 for our businesses, led by our talented leadership, leveraging on the new infrastructure of SAP S4/Hana and digital tools to improve our operations for superior customer connect."
Indorama Ventures Public Company Limited, listed in Thailand, is a globally operating petrochemicals producer with a manufacturing footprint stretching across Europe, Africa, the Americas, and Asia Pacific. The company’s portfolio comprises Combined PET, Integrated Oxides and Derivatives, and Fibers. Indorama Ventures has about 26,000 employees worldwide and achieved revenue of US$18.6 billion in 2022. The company is listed in the Dow Jones Emerging Markets and World Sustainability Indices (DJSI).