Metamorphosis Synonyms: alteration, change, evolution [Webster's] - - PowerPoint PPT Presentation

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Indorama Ventures Public Company Limited (IVL) Metamorphosis Synonyms: alteration, change, evolution [Webster's] Analyst Presentation Thailand Opportunity Day The Stock Exchange of Thailand Bangkok, March 4, 2010 Disclaimer This


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Indorama Ventures Public Company Limited (“IVL”)

“Metamorphosis”

Analyst Presentation

Thailand Opportunity Day The Stock Exchange of Thailand Bangkok, March 4, 2010

Synonyms: alteration, change, evolution [Webster's]

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Disclaimer

This presentation has been prepared by Indorama Ventures Public Company Limited (“IVL” or the “Company”) solely for use at a presentation to potential investors. By attending the meeting where the presentation is made, or by reading the presentation slides, you agree to the following limitations and notifications and represent that you are a person who is permitted under applicable law and regulation to receive information of the kind contained in this presentation. This presentation does not constitute or purport to be an offer of shares under the laws of Thailand, as the transactions described herein are subject to numerous conditions precedent, contingencies and approvals. This presentation is strictly confidential to the recipient, may not be reproduced, retransmitted or further distributed to the press or any other person, may not be reproduced in any form and may not be published, in whole or in part, for any purpose. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, transmission, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Neither this presentation nor any copy of it may be taken, published, transmitted or distributed, directly or indirectly, in or into the United States

  • f America (the “United States”), Australia, Canada or Japan. Failure to comply with this restriction may

constitute a violation of applicable securities laws. This presentation is for informational purposes only, is not intended for potential investors and does not constitute, or form part of, and should not be construed as, an offer to sell or issue, or invitation to purchase or subscribe for or the solicitation of an offer to buy, acquire or subscribe for, any securities of the Company or any of its subsidiaries, joint ventures or affiliates in any jurisdiction or an inducement to enter into investment

  • activity. No part of this presentation, nor the fact of its presentation or distribution, should form the basis of, or

be relied on in connection with, any offer, contract, commitment or investment decision whatsoever and it does not constitute a recommendation regarding the securities of the Company. No reliance may be placed for any purposes whatsoever on the information contained in this presentation, or any other material discussed at the presentation, or on the completeness, accuracy or fairness thereof. The provision of the information in this document should not be treated as giving investment advice. The information in this presentation is subject to verification, completion and change. Accordingly, no representation or warranty, express or implied, is made or given as to, and no reliance should be placed on the completeness, accuracy or fairness of the information or opinions contained herein. Neither the Company nor any of its affiliates, members, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents or otherwise arising in connection therewith. Neither the presentation nor any part or copy of it may be taken, published, transmitted or distributed, directly

  • r indirectly, in or into the United States, its territories or possessions or to any “U.S. person” as such terms

are defined in Rule 902 of Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”), except to “Qualified Institutional Buyers” as defined in Rule 144A under the Securities Act. Any failure to comply with this restriction may constitute a violation of United States securities laws. No securities of the Company may be offered or sold in the United States absent registration or an exemption from registration or in a transaction not subject to, the registration requirements under the Securities Act. The Company has not registered and does not intend to register any portion of the Offering or shares offered thereby under the Securities Act or the securities law of any state in the United States or to conduct a public

  • ffering of securities in the United States. By attending the meeting where the presentation is made, or by

reading the presentation slides, you represent and warrant that you are either (1) a qualified institutional buyer

  • r (2) a non-U.S. person located outside the United States and to the extent you purchase any Securities in

the Offering you will be doing so pursuant to Rule 144A or Regulation S under the Securities Act. This presentation contains “forward-looking statements”, which are based on current expectations and projections about future events, and include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “plans”, “could”, “should”, “predicts”, “projects”, “estimates”, “foresees” or similar expressions or the negative thereof, as well as predictions, projections and forecasts of the economy or economic trends of the markets, which are not necessarily indicative of the future or likely performance of the Company. Such forward-looking statements, as well as those included in any other material discussed at the presentation, concern future circumstances and results and involve known and unknown risks, uncertainties and other important factors beyond the Company‟s control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions and estimates regarding the Company and its subsidiaries‟ present and future business strategies and the environment in which the Company will operate in the future. Forward-looking statements are not guarantees of future performance. These forward-looking statements speak

  • nly as at the date of this presentation, and none of the Company, nor any of its agents, employees or advisors

intends or has any duty or obligation to supplement, amend, update or revise any such forward-looking statements to reflect any change in the Company‟s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based or whether in the light of new information, future events or otherwise. Given the aforementioned risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise. The results of operations for the periods reflected herein are not necessarily indicative of results that may be achieved for future periods, and the Company‟s actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited, to those discussed in the

  • ffering memorandum and any supplement thereto.

This presentation should not be treated as advice relating to legal, taxation, financial, accounting or investment

  • matters. By attending this presentation you (i) acknowledge that you will be solely responsible for your own

assessment of the market and the market position of the Company and of the risks and merits of any investment in the Shares, and that you will conduct your own analysis and be solely responsible for forming your own view

  • f the potential future performance of the Company‟s business and (ii) agree to be bound by the foregoing terms

and to keep this presentation and the information contained herein confidential.

2

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Agenda

3

Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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Achieved “Transformation”

 IVL 23rd largest listed company by market cap on SET  IVL 16th largest non-bank listed company by market cap on SET  Free float enlarged 3 times, 29% of free float of IVL is equal to around Baht 16,340 MM  Products resilient to recession, positive demand growth in the Polyester value chain  Reduce volatility through seamless integration in the Polyester Value Chain  Increase in gross margin through integration and optimized allocation of fixed overheads

  • ver larger revenue

 Lower effective tax, benefit from integration  Stronger financial position to enable future consolidation  Larger cashflow from operations to enable future integrated projects of economic sizes

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1. Based on closing price of Baht 13.00 per share on Tuesday, 2 March 2010

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Indorama Ventures Public Company Ltd “IVL”

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1. Major shareholder and after exercise of over-allotment option for 60 million shares equivalent to 1.4% 2. Based on closing price of Baht 13.00 per share on Tuesday, 2 March 2010

Issued and paid-up capital

  • Pre-IPO THB 3,351.5 MM
  • Post-IPO THB 4,334.3 MM
  • Par value THB 1 per share
  • Increase in issued and paid-up capital consists of :
  • IPO THB 400.0 MM
  • Exchange offer IRP minorities THB 582.8 MM

IPO Price

  • IPO price THB 10.20 per share
  • IPO funds raised in cash THB 4,080 MM
  • International and domestic placement to institutional investors

and individuals

  • Market capitalization on IPO price THB 44,210 MM

Use of Proceeds

  • Repay existing indebtedness
  • Acquisition of assets
  • Working capital and general corporate purposes

Shareholding Structure

(1)

Listing & Trading

  • Stock Exchange of Thailand “SET”
  • Sector “Petrochemicals”
  • Free float around 29.6%
  • First day trading on February 5, 2010
  • Top 20 listed company‟s on SET by market capitalization
  • Market capitalization THB 56,345 MM(2)

Market Capitalization

(THB Bn)

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Agenda

6

Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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The Polyester Chain

Global Polyester Chain Industry Overview 2009E (2010F)

Source: SBA-CCI (February 2010)

Demand

(Million tonnes)

Growth

(%)

Global Capacity Utilization

(%)

PX 26.3 (28.9) 7.1% (10.0%) 81% (79%) PTA 38.5 (42.2) 5.4% (9.6%) 84% (86%) Polyester Fiber 32.5 (35.7) 7.7% (10.0%) 64% (67%) PET Resin 15.1 (16.1) 2.2% (6.8%) 79% (78%)

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Polyester Fiber Consumer Demand by Region

44.2Mt

1. Real GDP, US$-based, Constant 1998 Prices. Source: IMF 2. SBA-CCI (February 2010)

31.9Mt

North America Asia European Union Central Europe South America Middle East & Africa

2009

North America Asia European Union Central Europe South America Middle East & Africa

2013F

Spectacular Polyester Fiber Demand Growth

A global demand CAGR of 8.5% from 2009-2013, well above GDP

8

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PET Resin Demand by Region

20.5Mt

1. Real GDP, US$-based, Constant 1998 Prices. Source: IMF 2. SBA-CCI (February 2010)

15.3Mt

North America Asia European Union Central Europe South America Middle East & Africa

2009 2013F

North America Asia European Union Central Europe South America Middle East & Africa

Spectacular PET Demand Growth

A global demand CAGR of 7.6% from 2009-2013, well above GDP

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PTA expected to become tighter

Driven by strong polyester demand and limited capacity additions

Global/Asia PTA Structural Surplus/Deficit

Source: SBA-CCI (February 2010) Surplus (deficit) at 96% capacity utilization less demand

Surplus (Deficit) MMt Capacity Utilization (%) 10 Global Asia

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Polyester Margins

Industry Monthly Integrated PTA/PET and PTA/DTY spreads

Integrated PTA/PET Margins (2004 – 2009) Integrated PTA/DTY Margins (2007-2009)

Source: SBA-CCI Spread definitions: PTA Spread = China Spot PTA CFR PET Spread = China Export FOB PET DTY Spread = China dom. 150 den

US$/tonne US$/tonne

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Agenda

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Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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PX as well as MEG are expected to remain long

Large supply additions, putting pressure on utilization rates

PX Structural Surplus/Deficit MEG Structural Surplus/Deficit

Source: SBA-CCI (February 2010) MMt Utilization (%) MMt Utilization (%)

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Energy Prices Forecast

Crude Oil and Natural Gas Quarterly Price Forecast

Crude Oil Q/Q Price Forecast Natural Gas Q/Q Price Forecast

WTI, US$ per barrel U.S. Gulf Coast Natural Gas Burner Tip, US$ per Million Btu Source: CMAI (February, 2010) *Current Month-to-Date Average Price

14

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Agenda

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Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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Polyester Industry Drivers

Near Term & Short Term

2010 2011 2009 2012

PX Tightness Delays in PTA/PET project start-ups Long PX/MEG supply position Continued capacity rationalization Robust Polyester & PTA demand growth PTA Inventory Rebuilding

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PTA /PET and PX/MEG run counter-cycles

Potential upside in margins for PTA/PET

Polyester Chain Margin Distribution

(Q/Q, Asia example)

PTA/PET Downtrend – PX/MEG Uptrend PTA/PET Uptrend – PX/MEG Downtrend

Source: SBA-CCI and IVL Analysis MEG spread = MEG CFR China less Asia Spot Ethylene CFR x 0.6 PX spread = ACP less Naphtha price PTA spread = PTA CFR China less ACP x 0.66 PET spread = PET China Average Price less (MEG CFR China x 0.345 + PTA CFR China x 0.87)

PTA/PET Uptrend – PX/MEG Downtrend

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Agenda

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Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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Higher returns to shareholders

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Return on equity

Achieve higher returns on a larger equity and capital base in year 2009

*Earnings per Share Return on capital employed

*Earnings per share based on issued and paid-up capital at the end of year Baht 3,352 million

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Improved margins

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Gross Margin Net Profit Margin

Margin improvement from upward integration with PTA in year 2009

Operating EBITDA Margin

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21

Increase in volumes and utilization rate

Products resilient to recession and global distribution platform

(„000 tpa)

Volume Growth (2008-2009) PTA/PET Capacity Utilization (2008-2009)

(%)

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Achieve Higher Revenues and Operating EBITDA

2008 - Revenues 2008 – *Operating EBITDA 2009 - Revenues 2009 – *Operating EBITDA

EBITDA Margin 9.5% 6.2% 7.0% 7.2% 11.6% 14.9% 12.8% 13.3%

(THB Bn) (THB Bn) (THB Bn) (THB Bn)

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*Based on pro-rata allocation of EBITDA of PTA business calculated on intra-group sales to PET and Polyester fibers

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Agenda

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Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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Capital structure

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IVL Net Financial Debt as at 31-Dec-09 IVL Balance Sheet as at 31-Dec-09

(THB Bn) (THB Bn)

*ST Debt includes short term loans, bank overdrafts and Baht 4.7 Bn in current portion of long term loans

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Stronger financial position

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Long-Term Loans by Currency Repayment Schedule for Long Term Loans *Net Operating Debt/EBITDA (x) Net Gearing

*Net operating debt includes net debt less project debt not generating revenues and earnings

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Higher cash flow from operations

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Notes:

  • 1. After change in working capital, net financial expenses and income tax
  • 2. Includes consolidation on acquisition of Indorama Petrochem, TPT Petrochemicals and Indorama Polyester Industries

2008 2009

Positive free cash flow in year 2009 and limited on-going capex requirement

Funded from project loans and capital increase Repayment

  • f debt

(1) (1)

(THB Bn) (THB Bn)

(2)

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4,106 2,642 687 3,785 712 430 62 4,856

1,000 2,000 3,000 4,000 5,000 2008 2009

No project execution risk

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Capex in Progress

  • AlphaPet Line 2 project completion
  • Capacity expansion in Petform
  • Capacity debottlenecking in Indorama

Polyester

  • Annual maintenance capex of around

US$ 15 million

Major capex and investment projects undertaken in year 2008-9 completed

Capital Expenditure by Business Segment

(THB MM)

4.7% 9.1% % of Sales

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Agenda

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Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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Committed revenue growth in 2010

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Around 20% growth in consolidated revenue from external sales

(„000 tpa) („000 tpa)

Year 2009 Available for sale in Year 2010

IPI Rayong facility has switched one line with capacity 108,000 tpa to produce PET resins

(1)

Notes:

  • 1. Captive sales to PET resins and Polyester fibers

1,593 1,600

(1)

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Expand gross margin

  • Increase PTA integration

Captive consumption Virtual integration - strategic alliance with suppliers (AlphaPet located next door to BP Chemicals PTA plant)

  • Lower conversion cost
  • Optimize fixed overheads, scale

from revenue growth

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PTA Sourcing

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Our financial condition will be healthier

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Prepare to enter next phase of growth through acquisitions and brownfield/greenfield expansions

Net gearing

Target level

Net gearing to fall below 50% through:

  • Cash from IPO proceeds received in

February, 2010

  • Increase investment in IRP from

69.3% to 99.1%

  • Higher cashflow from operations
  • Repayment of loans
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Agenda

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Section 1 Achieved “Transformation” Section 2 Our Markets Section 3 Our Feedstocks Section 4 Our Business Prospects Section 5 Our Performance Section 6 Our Financial Position Section 7 Our Growth Strategy Section 8 Conclusions

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Conclusions

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+ + + + + + = +

Larger market cap and liquidity High growth industry provides significant room for expansion Secured PTA feedstock through integration Favorable PX and MEG supply scenario Potential upside in margins for the polyester value chain Stronger financial position Committed top-line growth, Q1 2010 in line with our expectations

Promising 2010 outlook

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Thank you

Q&A