Indorama Ventures Public Company Limited is one of the world’s leading petrochemical producers and a leading global manufacturer of wool yarns. Richard Jones, Vice-President (Investor Relations & Corporate Communications), Indorama Ventures discusses the future plans across the company’s varied product portfolios.
What is the target set for 2016-2020 at Indorama?
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Indorama Ventures’ strategic plan (FY 2014- 18) is to build upon our position in each region, as well as expand geographical presence through organic growth and value-enhancing acquisition in its core business. We have an ambitious goal to grow total capacity to 11.8 MMT and double the Core EBITDA in 2018 over 2014. We also aim to deliver superior and long-term shareholder value by achieving seven consecutive years of EPS growth since 2012.
The next phase of growth for Indorama Ventures will be on non-commodity and high value-added (HVA) differentiated businesses. We plan to grow our HVA business from $2.5 billion to $4 billion revenue by 2018.
From 2015-2018, we have a CAPEX plan to invest around $3.1 billion on growth and $0.4 billion on maintenance (total $3.5 billion). 87 per cent of these capex are in the developed markets and also in the HVA. We are also looking at one HVA acquisition per annum until 2018.
Which focus areas will drive growth in the future?
We have focused strategies that consist of three major components:
Product diversification: We have significantly expanded our product portfolio to focus on high value-added (HVA) products which will drive the bottom line. We also intend to focus on the development of our research and development capabilities, either through our own facilities or through the establishment of key relationships with other industry players.
Geographical diversification: We are expanding into fast-growing emerging markets with presence in 21 countries (including Spain). Our geographical spread give us unique potential for growth while bringing us closer to the global businesses of large clients and allowing us to serve new markets.
Value chain integration: We seek further growth through acquisitions of other PET, fibres and yarns, oxide and glycols or PTA or other products in our value chain. Our objective is to strengthen our position as a market leader in the polyester value chain segment of intermediate petrochemicals in terms of scale, integration and differentiation as well as profitability and return on investment.
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Larger upstream integration projects are under review to capture better margins in the Polyester value chain and lower the impact of the price movement of our key raw materials.
What steps have been taken at Indorama to ensure growth in your niche?
The polyester value chain market has a huge potential for growth in the long term. The world’s population is expected to reach 9 billion by 2050 and the new middle-class households will increase to 3 billion over the next 20 years. A growth of urban populations and middle-income households as well as the rise in disposable income levels will lead to greater polyester consumption in the future. Demand for PET is also rising along with polyester. The PET market is expected to grow at a CAGR of 6 per cent, with a double-digit growth in markets such as China and India.
The current economic slowdown and many businesses are under pressure. This situation allows us to be able to secure the best deals as many current owners need to sell their businesses due to financing issues. By pursuing M&A strategy on the core business during a weak economy, we have a higher chance of creating shareholder value and delivering greater returns.
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