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Group CEO Corner
I am pleased to inform you that your company continues to deliver on our promise of prudent growth. Despite intense margin pressure in the industry, 2016 was a good year for us as we delivered record results across all key indicators. Some of our critical achievements included annual production growth of 24%, EBITDA growth of 25% and a net profit growth of 145%. Each segment contributed to this growth. This was because we have pursued our strategy of geographical expansion, earnings diversification and feedstock integration.

Our cash flows from operations have remained strong and, along with proceeds from the perpetual bond, has enabled us to fund growth capital expenditure of approximately THB 47 billion without increasing debt between 2013 to 2015. In 2016, this continued as we benefitted from THB 25 billion in operational cash flows that helped fund a significant portion of our growth capital of THB 34 billion. In the context of our expanded portfolio, I expect operational cash flows to remain strong going forward, which will afford an opportunity to lower our debt level and yet provide sufficient headroom for accretive growth opportunities.

A unique global position in the integrated PET business places us in an advantageous position. Given our global scale, the Company is well positioned to benefit as and when the global supply demand equation improves. Fewer new announcements of capacity expansions in Asia, expectations of a higher interest rate environment and greater caution by lenders in China are expected to play a role in accelerating the pace of consolidation in the industry and improving the margin environment in the sector. As a global leader, IVL stands to benefit the most as a result.

New Vision

Looking to the future, we are focusing on our new vision for the future of the Company, “to be a world-class chemical company making great products for society.” Over time, we have evolved from a pure-play polyester company to a wider yet relevant range of products in the petrochemical industry. Moreover, we are a part of society and want to contribute positively to its sustainable development and growth, which our vision makes clear. In addition, we will continue to invest in green energy and recycling where practical so that we lower our greenhouse gas emissions and consumption of depleting natural resources over time.

The Solutions Company

Becoming a world-class company entails fully utilizing our ability to enhance customer intimacy as we offer more innovative services and products on a global level. Not only do we cover the world with our presence, but we also offer more related products in the resin, packaging and fiber industry than ever before. In many segments, like hygiene fibers, we are one of the world leaders, but in others like the auto segment, we are climbing rapidly to leadership positions.

Shareholder Value

Besides our market strength, your company is also creating incremental long-term value for shareholders through key strategies and demonstrated strong execution capabilities. By doing so, we have protected our earnings from downside risk while positioning ourselves for future upside. Our performance is a testimony to the combination of several elements working in seamless harmony. The strategy of earnings diversification, growth in key locations and integration has continued to play a vital role in our ability to deliver industry-leading performance.

The future looks even more exciting as we pursue our journey of profitable growth. This includes an investment of around USD 1 billion towards growth projects previously announced and an avenue to invest additionally up to USD 4 billion between 2017 and 2020, subject to the success of our recently completed strategic business plans. For more details on our business plans, please go to http://www.indoramaventures.com/upload/presentations/file_28022017152519.pdf.

We are a Growth Company

During the year, we extended our footprint following the acquisition of an aromatics facility in Decatur, USA, and a PTA/IPA/PET facility in Spain. We consolidated our presence in India and expanded our fibers capacity in Indonesia and Thailand. We believe our earnings accretive acquisitions allow us the unique ability to offer an enhanced value proposition and a superior supply chain to our clients. These new assets in particular are delivering an EBITDA margin of 18.6% due to their larger scale and integration as well as high contribution from new HVA chemicals, NDC and IPA, which have contributed to a positive quantum of Core EBITDA and profit growth.

I am pleased to report that our dual-feed, gas-based cracker is progressing on budget and on schedule and is expected to start up well ahead of some of the other greenfield projects announced in North America. This first-mover advantage will deliver significant shareholder value. Feedstocks have been secured under long-term agreements and environmental permits have been received for this Louisiana cracker. This investment is a fundamental element in IVL’s strategy to utilize low-cost shale gas feedstocks to improve margins further in our high-growth glycols and PEO segments.

Strengthening our Bottom Line

Besides our investments that will lead to accretive growth, we have seen margins growing faster than volumes in 2016, indicative of higher growth in our high value- added (HVA) businesses and the value generated by vertical integration. Today, we have HVA products in all the business segments and all the major economic regions of the world. High value-added businesses contributed 19% of volume and 48% of EBITDA in 2016, revealing that the new product mix in our portfolio is leading to a transformation. The Fibers business in particular has a strong R&D platform; we will thus continue to invest further in an ongoing endeavor to provide unique solutions that help strengthen our offering to our customers, including in the polymer segment. About 62% of our HVA products are businesses protected by proprietary information and intellectual property.

On the innovation side, IVL has a superior portfolio of new products and developments that are at the stage of being commercialized or in early commercialization. Besides improvements of existing products, the focus is to offer in the future new products with additional value to customers like intelligent fabrics, composites and environmentally-friendly products.

Trends to Watch Out for

Population growth in the emerging markets and an ageing society in the developed world are underpinning the demand for hygiene products such as adult diapers. A new emerging group is the rising middle class, with over 3 billion with higher disposable incomes expected by 2030. We are well positioned in both emerging markets and developed economies to serve the emerging trends in the hygiene as well as auto and industrial businesses.

Trends like urbanization, climate change and demographic developments create a need to move away from traditional materials to technical textiles. Moreover, environmental applications will become ever more important. Air pollution in developing countries and the availability of drinking water have already become major issues and will lead to the increasing use of more efficient filtration systems where technical textiles play a major role. There is also a strong shift in the automotive industry, moving away from the traditional combustion engine to electrical vehicles and further to autonomous driving, which will spur the innovation of technical textiles and polymers.

Looking Ahead

The past five years have been challenging and it is gratifying to know that we have not only met, but exceeded industry expectations. The next five years look more promising and, given our global scale, we are well positioned as new demand for PTA and PET outpaces new supply. Rapid urbanization, higher per capita disposable incomes and focus on hygiene and personal safety will create incremental demand.

As PTA margins in Asia improve, the entire value chain improves across all geographies on the back of higher import parity led domestic realizations.

In Conclusion

We started this journey with a handful of revenue streams. Today we have around 21 and are well on our way to further growing this to 22. These earning streams are aimed at enhancing value addition and hedging the value chain by increasing feedstock integration and improving the overall financial performance of the Company.

We believe these businesses bring us even closer to our customers with our enhanced ability to provide a better value proposition and, overall, a superior and reliable supply chain to the industry. Not only will we grow over the next four years but we will also enhance our overall earnings significantly.

All of this has been achieved due to the shared vision, dedication and passion of our global talent pool comprising some 15,000 individuals: individuals who come from diverse cultures, diversities and ethnicities and work tirelessly around the world, and for their passion and hard work we have to congratulate and thank them for an excellent job.

I also want to thank the Chairman and the Board of Directors, the regulators, our partners, suppliers, financiers and investors for their support and confidence in the Company.