Richard Jones
Vice-President (Investor Relations & Corporate Communications) Indorama Ventures
We plan to grow our HVA business from $2.5 billion to $4 billion revenue by 2018
Indorama Ventures Public Company Limited is one of the world's leading petrochemical producers and a leading global manufacturer of wool yarns. Richard Jones, Vice-President (Investor Relations & Corporate Communications), Indorama Ventures discusses the future plans across the company's varied product portfolios.
What is the target set for 2016-2020 at Indorama?
Indorama Ventures' strategic plan (FY 2014- 18) is to build upon our position in each region, as well as expand geographical presence through organic growth and value-enhancing acquisition in its core business. We have an ambitious goal to grow total capacity to 11.8 MMT and double the Core EBITDA in 2018 over 2014. We also aim to deliver superior and long-term shareholder value by achieving seven consecutive years of EPS growth since 2012.
The next phase of growth for Indorama Ventures will be on non-commodity and high value-added (HVA) differentiated businesses. We plan to grow our HVA business from $2.5 billion to $4 billion revenue by 2018.
From 2015-2018, we have a CAPEX plan to invest around $3.1 billion on growth and $0.4 billion on maintenance (total $3.5 billion). 87 per cent of these capex are in the developed markets and also in the HVA. We are also looking at one HVA acquisition per annum until 2018.
What are the top achievements during the last five years of this decade?
Indorama Ventures has made significant progress over the past years. Notable achievements include:
167 per cent growth in the size of the company in last 5 years: A capacity growth from 3.3 MMT in 2010 to 8.8 MMT in 2015 (including India) with a target of 11.8 MMT in 2018, further growth of 25 per cent over 2015. While we are today the largest PET producers in the world, it is our goal to become one of the top 20 chemical companies in the world by 2020.
Advancing towards High Value-added (HVA) Segment: We have expanded from being a pure commodity company to having a substantial high value-added (HVA) differentiated business including recycling products which accounts for 33 per cent of revenues and 45 per cent of EBITDA.
Acquisitions: Acquisitions of well-known polyester specialty businesses like America's Invista and Germany's Trevira, both descendants of Hoechst, as well as the acquisition of a manufacturer of high value-added polypropylene fibres and yarns for hygiene applications, FiberVisions, have been a game-changer for Indorama Ventures since 2012. These acquisitions facilitated the entry of Indorama Ventures into the branded specialist business and provide access to outstanding research and development facilities with accompanying intellectual property. We see growing opportunities for technical and automotive applications, both for staple fibres and for filaments. The acquisition of a manufacturer of Nylon 6.6 Polyamide fibres and yarns, PHP fibres, provides us with a horizontal entry into technological yarns used in air bags and tire cords for automobiles. These achievements are significant and have made Indorama Ventures headway on the HVA front.
Other important element of our HVA portfolio is recycled PET and fibres. Entering the recycling space in 2011 with the acquisition of Wellman Europe, Indorama Ventures today has eight recycling platforms across three continents. We are well positioned to take advantage of the increasing demand for recycled content in premium applications.
Our investments into HVA products over the past few years are delivering positive returns due to premium margins that they command over necessities and due to the barriers to entry that we have created for ourselves.
Please share details of your last fiscal and the growth percentage from 2010-2015?
There has been 167 per cent growth of capacity in 2015 over 2010 and a growth of 17 per cent in 2015 over 2014 (including India).
Which focus areas will drive growth in the future?
We have focused strategies that consist of three major components:
Product diversification: We have significantly expanded our product portfolio to focus on high value-added (HVA) products which will drive the bottom line. We also intend to focus on the development of our research and development capabilities, either through our own facilities or through the establishment of key relationships with other industry players.
Geographical diversification: We are expanding into fast-growing emerging markets with presence in 21 countries (including Spain). Our geographical spread give us unique potential for growth while bringing us closer to the global businesses of large clients and allowing us to serve new markets.
Value chain integration: We seek further growth through acquisitions of other PET, fibres and yarns, oxide and glycols or PTA or other products in our value chain. Our objective is to strengthen our position as a market leader in the polyester value chain segment of intermediate petrochemicals in terms of scale, integration and differentiation as well as profitability and return on investment.
Larger upstream integration projects are under review to capture better margins in the Polyester value chain and lower the impact of the price movement of our key raw materials.
What steps have been taken at Indorama to ensure growth in your niche?
The polyester value chain market has a huge potential for growth in the long term. The world's population is expected to reach 9 billion by 2050 and the new middle-class households will increase to 3 billion over the next 20 years. A growth of urban populations and middle-income households as well as the rise in disposable income levels will lead to greater polyester consumption in the future. Demand for PET is also rising along with polyester. The PET market is expected to grow at a CAGR of 6 per cent, with a double-digit growth in markets such as China and India.
The current economic slowdown and many businesses are under pressure. This situation allows us to be able to secure the best deals as many current owners need to sell their businesses due to financing issues. By pursuing M&A strategy on the core business during a weak economy, we have a higher chance of creating shareholder value and delivering greater returns.
Which businesses has Indorama vertically and horizontally integrated into in the last 5 years?
We have completed integration both vertically and horizontally into MEG, PTA, PET resin, polyester fibres and yarns and HVA products. We believe that integration enhances our operating efficiency, competitiveness and responsiveness to customers and market developments, as well as allowing stability in volumes and profits.
Expanding presence and entry into the EO/EG business: Expanded our presence in 62 countries now (including Cepsa Spain) and also expanded our business vertically into MEG segment (part of EOEG), which is one of the main raw materials for our downstream products, by acquiring the largest single EO/EG production facility in the US. Indorama Ventures' integration into MEG adds value to US PET and polyester margin chain.
We are also focused on the consolidation of businesses acquired to bring about significant gains from synergies and as well from new products by leveraging on our industry leading innovation platform. We also took on some major initiatives at our Trevira fibre facility in Europe, including a consolidation from two sites to one, additional productivity improvements and a refocus towards specialty products.
Moving forward, our strategy will focus on going further into ethylene and paraxylene raw materials, in line with our downstream polyester and other feedstock (PTA and MEG) capacities.
Published on: 07/10/2016
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
