Indorama Ventures will divest, right-size assets and cut costs under revised strategy

LONDON (ICIS)–Fundamental long-term changes in global chemicals markets have prompted a significant review of strategy, Indorama Ventures said on Monday.

The company suffered a heavy loss in 2023 against the backdrop of oversupplied markets and weak demand.

Supply side pressure and weaker demand in China are among the factors that have created unprecedented industry conditions it said. It is shifting strategy to right-size operations, deleverage its business and cut costs.

The company reported a 53% drop in earnings for 2023 as revenues fell by 17%, with fourth quarter EBIDTA down 46% on 8% lower sales. A net loss for the year of $310 million (from a profit of $884 million in 2022) included an asset impairment on an incomplete plant in Texas.

The company said that it plans to reduce net debt by $2.5 billion to around $4.3 billion in 2026. This includes generating $800 million in cashflow from “operational improvements” and a further $1.7 billion from actions including divestments, “asset actions” and “select business listing”. The aim is to reduce its debt to EBITDA (earnings before, interest, tax, deprecation and amortisation) ratio to less than 3X.

An asset optimization program is targeted at lifting the company’s operating rate from 74% to 89%, it said. This will include “moving to lower-cost facilities and right sizing manufacturing capacity”, it added. A further $450 million run rate of efficiency gains is planned to be in action by 2026. The sale of non-core assets and other “value unlocking strategies” aims to generate about $1.3 billion in cash proceeds.

Indorama Ventures said that by leveraging sustainability innovation it can create an additional $350 million/year of value.

Under the revised strategy the company’s Integrated Oxides and Derivative (IOD) business segment will be renamed Indovinya.

Intermediate chemicals assets, including integrated purified ethylene oxide (PEO), ethylene glycol (EG) and methyl tertiary butyl ether (MTBE) assets will move to Indorama Ventures’ Combined PET (CPET) segment.

Indovinya will focus on downstream products and for Indorama Ventures markets will include home & personal care, crop solutions, coatings & solutions and energy & resources, it said.

A run rate of $527 million in efficiency gains was achieved in 2023 and the roll out of a new enterprise management system in 2024 will unlock further value, it added.

A $308 million non-cash impairment was taken in Q4 2023 it said on the suspension of activity on the partially completed purified terephthalic acid (PTA)-polyethylene terephthalate (PET) joint venture with Alpek in Corpus Christi, Texas.