Ref. No. IVL 001/11/2022

10 November 2022

The President

The Stock Exchange of Thailand

Subject: Submission of Quarterly Reviewed Financial Statements and the Management Discussion and Analysis of Indorama Ventures Public Company Limited for the third quarter ended September 30, 2022

We are pleased to submit:

  1. Consolidated and Company only Quarterly Reviewed Financial Statements for the third quarter of 2022 (a copy in Thai and English)
  2. Management Discussion and Analysis (MD&A) for the third quarter of 2022 (a copy in Thai and English)
  3. Company's performance report, Form 45 for the third quarter of 2022 (a copy in Thai and English)

Please be informed accordingly.

Sincerely yours,

Mr. Aloke Lohia

Group CEO

Indorama Ventures Public Company Limited

Company Secretary

Tel: +662 661 6661

Fax: +662 661 6664

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3Q22 Executive Summary

3Q22 Performance Highlights

  • 3Q22 Revenue of US$ 4.9B, an increase of 27% YoY and a decline of 10% QoQ
  • 3Q22 Core EBITDA of US$ 606M, an increase of 39% YoY and decline of 20% QoQ
  • Last twelve months (LTM) 3Q22 Core EBITDA of US$ 2,476M, an increase of 60% YoY
  • Core EBITDA per ton of US$163 in LTM3Q22 and US$159 in 3Q22
  • Operating cash flow of US$ 1,952 in LTM3Q22, an increase of 59% YoY
  • 3Q22 Core Net Profit of THB 10.34B (LTM3Q22: THB39.62B) and Reported Net Profit of THB 8.14B
  • Strengthened balance sheet QoQ contributed by strength in US dollar leading to THB translation gains as well as strong liquidity of US$ 2.60B in the form of cash and cash under management plus unutilized banking lines

3Q22 Summary Financials

Table 1: Core Financials of Consolidated Business

$million

3Q22

2Q22

3Q21

3Q22

3Q22

(except where stated otherwise)

QoQ

YoY

Production Volume (MMT)5

3.82

3.83

3.73

(0)%

2%

Consolidated Revenue1

4,896

5,451

3,867

(10)%

27%

Core EBITDA2,3,6

606

758

437

(20)%

39%

Combined PET

431

258

327

(24)%

27%

Integrated Oxides and Derivatives6

218

259

120

(16)%

82%

Fibers

49

55

49

(11)%

2%

Core EBIT6

572

277

422

(26)%

52%

Core Net Profit after Tax and NCI4,6

280

386

180

(28)%

55%

Core Net Profit after Tax and NCI (THB m) 6

13,232

5,929

10,341

(22)%

74%

Core EPS after PERP Interest (THB) 6

1.81

2.32

1.02

(0.52)

0.79

Core EBITDA/T ($)6

159

198

117

(20)%

36%

Operating Cash Flow

279

901

290

(69)%

(4)%

Net Operating Debt to Equity6 (times)

0.90

0.91

0.86

(1.48)

3.70

  • Combined PET includes Integrated PET, Specialty Chemicals and Packaging.

1Consolidated financials are based upon elimination of intra-company or intra-business segment transactions.

2Total of each segment may not always tally with consolidated financials due to holding segment.

3Core EBITDA definition, please refer to the definition page

4Core Net Profit definition, please refer to the definition page 5Volumes exclude PX and ethylene being captive.

6In 2021, IVOL P&L values are moved below EBITDA to extraordinary items and consider IVOL capital employed as Non-operating Debt

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Overview

This year has been shaped by a number of unprecedented macroeconomic factors. In the last 18 months, we have seen very strong movements of Brent crude oil, strengthening of the US dollar, hyperinflation and supply chain disruptions, all peaking in 2Q22.

As a result, IVL had an exceptionally strong second quarter which has started normalizing in 3Q22. The Ukraine crisis brought more upheaval in the form of volatile energy prices, predominantly in Europe, while China's zero-COVID policy resulted in dramatically reduced consumption that impacted markets globally.

Management is pleased with our performance for the first nine months and third quarter of 2022.

Combined PET (CPET):

  • YTD Core EBITDA of US$ 1,192M, an increase of 42% YoY.
  • YTD Core EBITDA Margin of 13%.
  • Revenue for 9M22 is US$ 9.2B, a YoY growth of 38%.

Our largest segment has seen steady demand and volumes through the year. This can be seen across all regions, apart from Europe that is currently in the midst of an energy crisis impacting both demand and margins. Pressure in Europe will continue as long as energy markets remain volatile.

Integrated Oxides & Derivatives (IOD):

  • YTD Core EBITDA of US$ 604M, an increase of 137% YoY.
  • YTD Core EBITDA Margin of 18%.
  • Revenue for 9M22 is US$ 3.3B, a YoY growth of 82%.

The Integrated Downstream portfolio has performed above expectation in the first nine months of the year. The Oxiteno acquisition has brought further strength to this portfolio through its regional market leadership in surfactants as well as with the addition of natural fatty alcohols.

In the Integrated Intermediates portfolio, ethylene and MEG spreads see weakness driven by China lockdown and overcapacity, hovering at unsustainable levels for the industry. MTBE has seen strong performance this year and is operating at normalized margins in the third quarter.

Fibers:

  • YTD Core EBITDA of US$ 189M, an increase of 2% YoY.
  • YTD Core EBITDA Margin of 6%.
  • Revenue for 9M22 is US$ 3.0B, a YoY growth of 12%.

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The severity of China's zero-COVID policy has continued to hurt polyester fiber demand and margins, impacting the Lifestyle fibers businesses. Both Hygiene and Mobility fibers have been performing relatively well YoY despite the high energy costs in Europe. Management has shown good agility in managing pricing.

Outlook

As we move into the fourth quarter, we expect the current macroeconomic conditions to prevail. Our European operations will continue to face headwinds in the form of high utility costs. Volumes in both the Americas and Asia are expected to remain steady. As we sell the inventory that was built up in the third quarter and cash gets released, we expect to have an improvement in operating cash flows in Q4.

CPET is entering the period of seasonal weakness in Q4, however Asia and the Americas is expected to see steady performance. Europe will continue to face demand and margin pressure as a result of the volatile energy situation.

IOD's Integrated Intermediates portfolio will continue to see healthy MTBE spreads but MEG margins will remain weak. Ethane costs have started to decline which will bring some benefit to ethylene margins however spreads remain well below reinvestment levels. We are adjusting our production rates to optimize profitability.

For IOD's downstream portfolio, we anticipate continued strength in surfactants demand, along with the new oleochemicals offering. With the smooth integration of Oxiteno into IOD's portfolio, management is confident of realizing the identified synergies throughout the next years.

Lifestyle fibers will experience continued demand and margin weakness, driven by persistent China lockdown. Both Mobility and Hygiene fibers are expected to see steady volumes.

Portfolio Evolution

Today IVL has a platform of businesses that is relatively (to other chemical peers) less volatile to macroeconomic conditions due to 3 key differentiating factors:

1 - Geographical Diversity

With manufacturing locations in 35 countries evenly distributed across three regions, IVL's widespread presence provides natural mitigation to the increasingly volatile geopolitical landscape. Moreover, with the recent global disruptions, IVL's ability to provide shorter supply chains and serve from multiple locations brings trust and reliability to our customers.

2 - Multiple Earning Streams

With 3 strong business segments and 10 business verticals, IVL's combined portfolio acts as a meaningful hedge to disruptions in one area at any given time. The whole is stronger than its parts. As we build an increasingly balanced portfolio, IVL is creating further opportunities for growth especially in downstream portfolio in areas such as home & personal care and food packaging.

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3 - Attractive End Markets

Over 70% of IVL's products serve consumer daily necessities in applications such as food and beverage packaging, home and personal care, and crop solutions. Not only are these end markets relatively demand inelastic, they also have attractive growth rates catering to increasingly favorable consumer needs such as safety and hygiene.

The result of this combination of competencies is resiliency of earnings across a cycle. Our current portfolio has a variability of 20% in its EBITDA performance in the last five years on a proforma basis and delivers an average Core EBITDA of US$130 per ton across the cycle. If we exclude 2020, this variability becomes 14% (average Core EBITDA/ton of US$140). With each era of growth, we are successfully lifting the quality of our earnings.

In addition to the evolution of our platform, we continue to enhance our systems to strengthen and future-proof the organization. This includes investments in SAP S4 HANA, an integrated central ERP platform, continual productivity improvements through Project Olympus, and the six new corporate functions to support our business leaders in navigating the challenges of the future.

Corporate Strength

We started the year with net debt to equity of 1.21 times which has improved to 1.1 times by the end of 3Q22. This is after US$ 2,055M of capital expenditure and increase of US$ 389M in net working capital. Our liquidity position is strong with US$ 2.60B in cash and cash under management plus unutilized banking lines.

The strong US dollar has not only reduced our fixed costs in economies facing weakening currency, but also improved our equity in the balance sheet as investments in overseas subsidiaries recorded translation gains of US$ 205M in 3Q22.

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Indorama Ventures pcl published this content on 10 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 November 2022 08:36:01 UTC.