HomeOur CompanyGroup CEO Corner
Group CEO Corner
2015 was a truly transformative year for your company. We have proven our resilience as the industry has faced new challenges. IVL has taken these rollercoaster times as an opportunity to remain focused and surge ahead to deliver a distinct and compelling investment platform with scale advantages, technology ownership and innovative products that our customers can rely upon; creating the IVL differentiation. Today we stand as the most global Thai company in the stock market with presence in 20 countries. As you know, we are already the world’s largest PET producer with nearly 33% of the market in Europe and North America and the most vertically-integrated company in our space. Moreover, we are proud that one in six plastic bottles is made from IVL polymers; half of the world’s premium baby diapers are made with our fibers and a quarter of all quality airbags is made with our yarns.

Financially, I am pleased to inform you that your company is firmly on track to fulfill its ambitions to achieve double-digit EBITDA margins and double our core EBITDA by the end of 2018 compared with 2014’s core EBITDA of $600 million. At the same time, IVL aspires to quadruple its core EPS by the end 2018 when compared with 2014.

The recent transactions will be major accelerators in IVL’s ongoing transformation, through which we are creating significant growth and portfolio enhancement to each of our three powerful verticals: PET, Feedstocks and High Value Add (HVA) businesses that are interlinked and synergistic to deliver enhanced value for our customers as well as our shareholders.

The strategic transactions signed thus far are a game changer for the industry. Polyplex PET, in Turkey, is a consolidation of our core PET business in an emerging market and allows us to provide wider coverage of the Europe, Middle East and Africa (EMEA) region, while CEPSA Spain, upon completion, will complete our entire coverage of the region, as well as give us feedstock independence. CEPSA Spain also brings with it a new HVA feedstock for us, IPA, and is the only producer in the region. In Thailand, we acquired Bangkok Polyester to consolidate our core PET business and provide supply chain integration with captive PTA. The acquisition of Performance Fibers in China offers us a brand synonymous with decades of superior polyester tire cord in the largest growth market for automobiles, with supply chain economics through captive PET polymer produced at our GIVL site in China. We also prepared to capture the advantaged shale gas economics by acquiring an ethylene cracker in Louisiana, USA that will offer us feedstock independence and leverages on shale gas economics. In 2017, with the start up of the cracker, IVL will be amongst a few select companies to have integration from Aromatics/Olefins petrochemicals to downstream value added businesses.

In the near horizon as this is being written, we have agreed to acquire BP’s chemicals company in Alabama, USA that will provide us feedstock independence, through paraxylene integration, and HVA product growth in North America with the world’s only commercial production facility of NDC, all advantageously located right next to our existing Decatur site. This BP Decatur integration, combined with our CEPSA Canada PTA acquisition this past year, provides us with the most unique supply chain integration status in North America.

Last year was also a banner year in that finally we entered the Indian market with the acquisition of MicroPet. This is another core business entry in the fastest growth market in the region with the largest population next to China. We were fortunate to then negotiate a joint venture at the start of 2016 with Dhunseri Petrochemicals that allows our two companies to capture 38% of the entire Indian capacity.

2015 has been an extraordinary year of opportunity to deliver long-term, sustainable shareholder value. Through this combination of eight highly complementary transactions, we are creating global leadership, cost advantages and enhancements in each of our three strong, focused, industry-leading businesses.

In formulating our strategy for the future, we are closely following megatrends that will boost the sales of our packaging and fiber products. There will be nine billion people on the planet by 2050 and three billion of them will be middle class. 60% will migrate to urban areas and the world will require double the current amount of energy in order to live acceptable lives. Lifestyle changes will mean growing demand for packaging, personal care, auto parts, medical and hygiene fibers, industrial products and functional electronics. In necessities, there will be demand for more food and beverages in more convenient packaging by consumers who are increasingly shifting towards on-the-go consumption.

To accommodate growth, more volumes of the necessities products are required and we have targeted our capacity to grow from 9.2 million tonnes in 2015 to 11.6 million tonnes in 2018, with improvement in utilization so that actual production will move from 7 million tonnes to 11 million tonnes. We are looking at double-digit EBITDA margin in 2018, driven by HVA margins, volumes and integration. Having acquired strategic businesses in the past year, we are targeting a return on capital employed of over 15% enhanced by value addition and capex discipline. This will result in excellent returns for shareholders as our plans should lead to around four times core EPS growth over 2015-18. Our strategy of differentiation provides us high value-added products, which benefit from their high barriers to entry, superior margins, long-term contracts, great customer value, proprietary technology and know-how.

This is the “IVL Difference”. We are the only producer with a sizable recycling business and growth strategy, and the market leader in Europe in premium segments. We are the leading producer in rPET resin, using in-melt technology. We understand the need to reduce the carbon intensity of operations, from the carbon footprint of upstream suppliers or downstream customers. That is why we were one of the earliest proponents of recycled polyester, as we know that the appeal of polyester lies in its collectability and superior original properties vis-à-vis competing materials. The push towards a circular economy is creating a growing infrastructure providing tens of thousands of jobs, both in the West as well as in developing markets, producing a competitive feedstock in recycled material. The recycling of polyester creates economic returns across the chain, whilst simultaneously reducing the ecological impact on our environment. These flows of plastics can be recycled, reused and repurposed, and value could be created from the better use of PET alone.

Over the next 12 months we will create significant near-term value through substantial cost synergies and over the mid-term we can expect additional upside from margin growth from internal, rather than external, forces. We intend to pursue, and expect to unlock, even greater value for shareholders and customers in the longer term and more opportunity for employees as we strive for cost leadership in attractive segments and geographies.

We have experienced a tumultuous economic environment, and I would like to recognize our IVL team for their superb execution of company aspirations through these times. Their hard work and dedication have allowed the company to not only remain relevant, but to be a leader in its chosen industry.

We will continue forward on this path.


ALOKE LOHIA
GROUP CEO