SET-listed Indorama Ventures Plc (IVL), the world's largest polyester chain maker, has raised its projections for capital expenditure and output under its current four-year business plan, saying the global petrochemicals industry should see a recovery from next year.
In an exclusive interview with Post Publishing, IVL Group chief executive Aloke Lohia said the company had raised its spending budget for 2015-18 from US$1.8 billion to $2.7 billion (94.5 billion baht), of which $1.67 billion was spent in 2015 and the first half of this year.
Under the current plan, 15 billion baht is left for investment in the second half of this year, while the 2017 and 2018 investment budgets are 15 billion and 7 billion baht respectively.
Investment already planned for the next two years includes US cracker refurbishing, tyre cord expansion in China and debottlenecking and maintenance projects.
"If something really fantastic comes along and can add value to our business, we can invest more," Mr Lohia said. "But we are not looking at the moment and are focusing on further integration, synergies and leveraging existing operations."
IVL targets the group's production volume to reach 11.4 million tonnes by 2018, up from 10 million in the original plan. As of the second quarter this year, its output stood at 10.4 million tonnes compared to 8.8 million last year.
"We are halfway there and on track to meet that plan," Mr Lohia said.
In the second quarter, IVL reported a record core profit after tax and non-controlling interest of 2.9 billion baht, up 75% year-on-year, mainly because of margin recovery in the PET (polyethylene terephthalate) segment and additional PTA (purified terephthalic acid) volume stemming from its newest acquisitions in Spain and the US.
When non-cash inventory gains and net extraordinary income of 2.5 billion baht from the bargain purchase of IVL Spain were taken into account, second-quarter earnings were 5.9 billion baht. First-half net profit totalled 10.05 billion, up from 5.8 billion in the same period of 2015.
Net sales were 66.7 billion baht, up 9% year-on-year and 17% from the previous quarter. First-half sales rose 5% year-on-year to 243.7 billion baht. "The performance is in line with our expectations," Mr Lohia said. "The industry margin has reached the bottom and the improvement should be seen from 2017."
Demand-supply balance should be smaller next year and in 2018 with decreased new output arriving on the market, while manufacturers who cannot survive low margins may have to shut down production. Demand, meanwhile, will continue to expand by about 3 million tonnes per year.
IVL shares closed yesterday on the Stock Exchange of Thailand at 34.25 baht, down 1.50 baht, in trade worth 3.35 billion baht.