INEOS posts 20% drop in third-quarter profits

17 November 2008 15:39  [Source: ICIS news]

LONDON (ICIS news)--INEOS posted a 20% drop in third-quarter EBITDA (earnings before interest, tax, depreciation and amortisation) to €402m ($503m), down from €504m in the same period last year, the company said on Monday.

The UK-based petrochemicals major said it had been hit by €100m in inventory holding losses due to the significant decline in oil prices, while damage caused by Hurricane Ike had cost the company €15m in both the third and fourth quarters.

INEOS’ third-quarter sales increased 23% to €8.5bn, reflecting the impact of higher oil prices compared to the corresponding quarter in 2007.

The company requested covenant waivers from the lenders at its senior facilities due to unprecedented market conditions.

INEOS said it had seen an unprecedented fall in demand due to destocking and plant closures in the fourth quarter, as customers reacted to the weak macro-economic environment.

The collapse of oil prices was expected to mean a significant further inventory holding loss in the fourth quarter of around €560m, taking the full-year loss to €400m, INEOS added.

INEOS said it had identified €200m in annual cost savings and would cut planned capital expenditure for 2009 to €250m from €600m in 2008.

“In recent weeks, it has become clear that the entire industry is now facing a period of unprecedented market turmoil caused by the declining price environment and driven by general macro-economic uncertainty,” said INEOS chief financial officer John Reece.

“This is resulting in severe customer destocking. While this reduces short-term visibility, we believe that the picture will become much clearer at the end of first quarter 2009,” he added.

INEOS forecasted full-year 2008 EBITDA in the range of €1.7bn-1.8bn before inventory holding losses of €400m and exceptional events of €180m.

($1 = €0.80)

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By: Mark Watts
+44 20 8652 3214

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