IVL says it expects sales volumes to rise by 12% as firm looks to ‘set new benchmark’ for growth in 2021

Indorama Ventures Plc (IVL), one of the world’s leading makers of polyethylene terephthalate (PET), came out to say that that it was expecting its sales volumes in 2021 to see double digit growth thanks to the recovery in most of its business units.

“(We) expect 2021 to set new benchmark for IVL with growth coming from fibers and integrated oxides and derivatives (IOD) segment,” Aloke Lohia, the company’s Chief Executive Officer, said during a presentation at the annual general shareholders meeting.

“The growth will come from all 3 segments and all regions. Our business dynamics have improved since December 2020 with high crude oil prices and increased consumer demand.”

He said that IVL’s business dynamics have improved since December 2020 with higher crude oil price and increased consumer demand.

“Our combined PET segment provides strong cash flow visibility and is expected to outperform in 2021 as vaccination rolls out and on the go demand emerges,” he said.

IVL, which undertook its E-AGM today, said that it was witnessing a surge in demand for its products while it continues to remain robust with its plans to diversify.

The diversification process of IVL, which has been ongoing for nearly a decade now, has been undertaken to help IVL move away from the commodity business of bottle grade PET production to the use of PET in other aspects such as high value goods be it in tires, airbags or even diapers for kids.

IVL has passed 2020 in better than anticipated shape despite the turbulent times the global economy has seen, Aloke said.

Aloke added that 2020 brought no structural damage to the markets that IVL serves and all the end users of IVLs businesses have recovered from the lows of 2020 and some of them will have accelerated demand going forward. 

“We navigated through un-chartered waters and have emerged with renewed confidence and deeper understanding of our businesses. Our next era is off to an excellent start with secured growth platform which is managed by a talented deep bench of talent and our systems are providing the infrastructure which will leverage on our scale across our 3 segments of Combined PET, IOD and Fibers,” he said.

The company which today employs around 24,000 people in 123 plants located in 33 countries around the world, showed a consolidated revenue of $10.6 billion in 2020 and although PET accounted for about 44 per cent of the contribution margin, the fiber and IOD were equally split for the remainder of the margin contributions.

Aloke added that his intention is to see growth in downstream businesses to create more added value and upstream businesses to capture cost advantage.

Although IVL has been growing its PET business making IVL the largest global PET producer, and a leading producer of Recycled PET, it has also grown the IOD business with the ‘Spindletop’ acquisition.

This acquisition has given IVL a leading position in the IOD segment, being the 2nd largest producer of Ethylene Oxide and 3rd largest producer of Ethoxylate in the United States.

“Fibers – In Hygiene fibers, 50 per cent of premium diapers made globally use IVL fibers – In Mobility fibers, 1 in 4 airbags across the world are made from IVL yarns and we are the 2nd largest tire cord producer globally,” Aloke said.

Analysts have recommended ‘buy’ on the shares of IVL as they expect the company to exceed expectations in 2021.

Analyst Calls

Another positive factor for IVL has been the lack of competition with no new infrastructure built around the world that could compete and depress the market.

Kiatnakin Phatra Securities said, in a research report Tuesday Morning, that they upgraded the target price for IVL to 50 baht a piece from 43.90 baht projected earlier.

“We lift our price objective from 43.9 baht per share to 50 baht/share to reflect the increase in our earnings estimates, Komsun Suksumrun, analyst at Phatra said.

He said that the raising of net profit after tax (NPAT) by 7 per cent for 2021 and 9.5 per cent for 2022 due to an increase in the spread assumptions prompted by the solid performance that the broker expects in both 1Q21 and 2Q21.

“Our 1Q21 preview suggests that its core NPAT should come in at 2.8 billion baht (+59 per cent  YoY) and we expect very strong results in 2Q21 as it is a high-demand season for PET products worldwide,” he said.

Core 2Q21 NPAT is likely to range between 4.5 billion baht and 5 billion baht based on the recent integrated PET spread traction in April. 

“We now project overall EBITDA/ton to increase from US$89/ton in 2020 to US$123/ton in 2021 and strengthen further to US$139/ton in 2022.”Phatra said that its core NPAT forecast is above consensus estimate by 6% for 2021E and 27 per cent  for 2022. The NPAT consensus estimate downward revision troughed in November 2020 and since then the trend is upward

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