Indorama Ventures reports 243% rise in Q2 profits, margins remain ‘good’ into Q3 while volumes set to rise

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Indorama Ventures Plc (IVL), the world’s leading producer of Polyethylene Terephthalate (PET), has just reported a net profit of 20.28 billion Baht for its operations during Q2 2022, a record setting number that is likely to see further improvement as the company’s margins remain intact, while volumes are set to increase during the 2nd half of 2022.

IVL reported a net profit of 20.28 billion Baht or 3.58 Baht in earnings per share in Q2 2022 profits compared to 8.34 billion Baht and 1.45 Baht earnings per share, which is just over 243% year-on-year rise.

“The margins in July and August remain good, while we are anticipating volumes during the 2nd half of the year (July to December) to be higher,” a source in the company told Thai Enquirer.

IVL is set to hold an analyst conference at 15:00 hrs. today.

The company is yet to announce any plans for dividend although it paid 0.40 Baht for its Q1 2022 operations earlier this year.

Robust Growth and Recession Proof

IVL, which has more than 95% of its businesses operating outside Thailand, came out to say that its PET business in what it calls as ‘Combined PET’ (CPET) has achieved record earnings during the quarter as a result of high margins driven by seasonally strong demand, supply chain constraints and overall market tightness.

The company said in a statement to the Stock Exchange of Thailand (SET) that during this quarter this segment will likely see an additional uplift from the incorporation of a newly acquired packaging business in Vietnam, a high growth new market boosting IVL’s position in the region.

“Looking at global PET trade flows, China has considerably increased exports in 2022 with the Western markets successfully absorbing the increase in supply due to robust demand,” IVL said.

The CPET portfolio saw an increase of 13% quarter-on-quarter (QoQ).

IVL said that CPET continued to deliver a strong performance in Q2, achieving core earnings before interest, tax, depreciation, and amortization (EBITDA) of US$ 431 million, a growth of 35% year-on-year (YoY) and a 1% decrease QoQ, and reported EBITDA of US$ 618 million.

Sales volumes increased by 2% QoQ and 3% YoY. Reported EBITDA for the 6-months 2022 surpassed the US$ 1 billion mark, achieving US$ 1.17 billion.

IVL also said that during this quarter it incorporate two new businesses into the portfolio, Oxiteno and Vietnam Packaging, bringing an additional 12% in revenue growth.

The addition of Oxiteno added into IVL’s portfolio has brought an uplift of US$ 85 million of core EBITDA into the Integrated Downstream portfolio during Q2, driven by robust end market demand.

“With this strong performance, Oxiteno has demonstrated its ability to successfully navigate inflated raw material costs in this volatile environment, and with integration successfully underway, management is confident on delivering on US$ 30 million synergies by 2023 and US$ 100 million by 2025.”

The company said that as recession looms, “we may see consumer spending power decrease in durable goods which will affect our remaining 25% portfolio however the re-opening of China will bring considerable demand and therefore having an overall muted impact on IVL’s portfolio.”

The company’s PET business is usually a recession proof business.

Operational Highlights

  • Record Revenue of US$ 5.451 billion, an increase of 23% QoQ and 53% YoY
  • Record Reported EBITDA of US$ 1.01 billion, a growth of 29% QoQ and 83% YoY
  • Record Core EBITDA of US$ 758 million, a QoQ growth of 17% and YoY growth of 59%
  • Core EBITDA Margin at 14%
  • OCF of US$ 901 million in 2Q22, a cash conversion of 120% of Core EBITDA
  • Reported Net Profit of 20.28 billion Baht and core net profit of 13.23 billion Baht
  • Reported EPS of 3.58 Baht (LTM2Q22: 8.11) and Core EPS of 2.32 Baht (LTM2Q22: 6.14)
  • Two strategic acquisitions incorporated and contributing to the portfolio: Oxiteno (IOD) and Vietnam Packaging (CPET)
  • Total energy spends increased by US$ 27 million QoQ and US$ 155 million YoY, but was fully offset by enhanced margins

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