IVL to boost capacity via Brazilian acquisition
If approved, deal will secure country's biggest PET plant
published : 17 Mar 2018 at 04:00
newspaper section: Business
Indorama Ventures Plc (IVL), an SET-listed global chemical producer, has announced an agreement to acquire M&G Polimeros Brazil SA.
The deal comes with the largest polyethylene terephthalate (PET) facility in Brazil, with a capacity of 550,000 tonnes a year.
This plant benefits from virtual integration with a manufacturer of purified terephthalic acid (PTA), a key feedstock for PET.
The transaction is expected to be completed in the second quarter of 2018, subject to regulatory approvals.
The acquisition in Brazil is in line with the company's strategy to further extend its market position and expand its global footprint in key markets with high growth potential.
This strategic position is expected to allow IVL to deliver products to key customers in Brazil and elsewhere in a cost-effective and efficient manner.
Indorama Ventures is well positioned to service its current global client base and M&G's existing customers once the acquisition is complete and the plant is fully operational.
IVL expects immediate incremental revenue and cost synergies, driven by a substantial volume increase and potential value added through backward integration.
South America is an important emerging market, with demand for PET in the region growing at around 5%.
Per person consumption of PET is comparatively low in at 2.8 kilogrammes in South America, and has great potential for growth.
Brazil also has strong underlying fundamentals, supported by government policies to stimulate economic growth and strengthen the domestic market.
IVL continues to be on a transformational journey aimed at accretive growth and sustainable value creation, while maintaining financial discipline.
In the company's latest financial disclosure last month, IVL announced record earnings before interest, tax, depreciation and amortisation of US$1 billion (31.2 billion baht) for 2017, reflecting growth of 30%.
Significant improvement in the PET and feedstock business environment also enabled net profit to grow by 68%.
The Brazilian acquisition will significantly advance IVL's strategy in the necessities business, where the company aims to deepen its global footprint and build scale in key markets.
"[The acquisition] will be a significant action to strengthen our capability for profitable growth," said chief executive Aloke Lohia. "IVL now has unrivalled scale and global reach, being present in five continents with a uniquely balanced and integrated business model."
Mr Lohia said IVL looks forward to capitalising on the new market and opportunities for cross-selling to immediately deliver greater value to existing and new customers, while delivering profitable growth and enhanced shareholder value.
IVL has a global manufacturing footprint across Africa, Asia, Europe and North America.
The company's portfolio comprises necessities and high-value-added categories of polymers, fibres and packaging, selectively integrated with self-manufactured ethylene oxide/glycols and PTA where economical.
IVL shares closed yesterday on the Stock Exchange of Thailand at 55.25 baht, up 25 satang, in trade worth 2.7 billion baht.