Indorama Vntrs Unsp/Adr

Welcome everyone and thank you for taking time to join us for Indorama Ventures second quarter reserves briefing. My name is Vikas Jalan and Vice President of Investor Relations and Planning at IVL. Joining me today we have Mr. D.K. Agarwal, Deputy Group CEO and Group CFO. Muthu Kumar and Kumar Ladha, both are co-presidents for CPAT business. Alistair Amphot, Executive President for Indovina and Diogo Bori, Executive President for Fibers. A quick disclaimer that this meeting is being recorded and a replay of this session will be available on our website after the meeting. We have made a few assumptions and estimates on future trends for industry and business, which are based on our analysis of information at this point in time. So with that, I now invite Mr. Agarwal first to share business and financial highlights for second quarter 24. Over to you, Mr. Agarwal.

Yeah, thank you, Vikas. I think let's first understand what is the macroeconomic situation, which of course directly or indirectly impacts our industry as well as other businesses. The first slide on the left shows the economic deacceleration and interest rate. We have certainly seen some slowdown in the U.S. economic activity, affected in a lower PMI for second quarter 24. And then again in July, which could pave the way for potential rate cuts in the coming months. And as you might have seen, a lot of volatility in the stock markets after some data of unemployment came in. These cuts might extend to other major economies as well. However, even with the expected rate reduction, financing costs would like to remain elevated as compared to pre-COVID level. However, I think they will peak in the second quarter. IVL strategy with about 50% of its debt being floating by the end of 2024 positions the company to benefit from these rate cuts. So as you know, we have been in the fix earlier. Now we have been on the floating and we'll certainly look at the opportunity to fix it to reduce our interest costs. Challenges and reforms in China. The economic environment in China remains challenging. Nonetheless, the recent reforms announced by the Chinese government during the third plenary session in July and property sector expect to stabilize, offer some encouragement and may positively impact the market. We certainly see India is a very, very strong market today. The third item is the supply chain disruption. As you are aware, the world supply chain is again getting disrupted. The supply chain disruption have intensified with a noticeable spike in the freight rate as you can see the Shanghai freight index as evidenced by the rising Shanghai freight index. The disruptions are driven by easing destocking and ongoing issues in the Red Sea again. Persistent port congestion is increasing the logistic cost and extending delivery times. The high yields a strong domestic production presents because of the geographical footprint in the key market is expected to again provide a strategic advantage, particularly as this disruption will gradually be reflected in the sales pricing from third quarter 24 onwards. Because, you know, there is always some lag. in the freight rates. So we certainly see some benefits in the western markets where the freight sector is. Actually, even in the regional, because even from China to Indonesia, the freight rate has become significantly higher, around $1,500. So we are seeing a lot of disruption happening. High oil prices and competitive advantage, which is a very important thing, as you can see in the fourth bucket here. Sustained high oil prices continue to underscore the competitive age of U.S. gas, with IEA leveraging its local production capabilities and gas-based feedstock to maintain a competitive advantage in this environment. As I speak with you today, the gas price is $1.90. Spreads have gone down. The crack spreads have gone to 30 to 32 cents per pound, never seen in last few years. So very interesting time when the gas prices have come down and the ethane prices are very low. So the cost of ethylene in the United States is very low. Go to the next slide. So let's talk about second quarter financial results. Indorama Ventures achieved an adjusted EBITDA of $370 million in second quarter 24 with 1% increase in volume quarter on quarter. Sales volume reached 3.64 million tonne driven by demand growth and the ease of destocking. Segment performance, Indovania's performance saw notable improvements in both volumes and margins which Alistair will cover. Consistence with the industry trends observed among major specialty chemical companies. So the destocking has come to an end and we are seeing the recovery in the margins and volumes. An increase in contribution margin per ton as well as volumes are reported in Novena. Despite disappointingly low benchmark spreads for Asia integrated PET, even during the high season, as you know, in second quarter, normally the integrated PET spreads goes up. But because of overhang of the Chinese PET capacity, they remain very depressed. So this was disappointing. IVL was able to maintain a premium over the benchmark due to our global footprint and strong domestic supply chain capabilities. As you can see that CPET, when they had a lower benchmark spreads, still the adjusted EBITDA remains 370 and you will see in the CPET section, it remains stable. Operational disruption, I think this is something Alistair will cover. 50 days unplanned outage at the Iowal gas cracker led to an EBITDA loss of approximately $17 to $18 million in second quarter 24. So this EBITDA would have been better by $17 to $18 million. And with the improvement in the FRAC spread, this will certainly benefit in third quarter. Now this cracker's operations has normalized in August. beginning of August and high gas cracker spreads continuing. Performance is expected to improve from third quarter due to enhancing Shell gas advantage as I just talked in the United States. Cash has been very important focus for the company. So operating cash flow for the trailing 12 months up to second quarter 24, the company reported an operating cash flow of $1.5 billion with a cash conversion of 123%. In second quarter 24 alone, operating cash flow was $494 million, with a cash conversion of 134%, benefiting both from EBITDA and a release of nearly $266 million in net working capital. So a lot of focus on the working capital. Despite having a strong operating cash flow in second quarter 24, our debt, net debt, went down only by 32 million as we had to make a deferred payment for Occitano acquisition of $150 million and the two dividend payments came in this quarter. I think in Capital Market Day, we talked to you about asset optimization. I'm happy to report that significant progress was made in asset optimization, including the closure of PET PTA site in Netherlands, effective 30th June, the PTA site in Montreal, Canada, and the ethylene oxide and derivative facility in Australia. These actions have resulted, as you have seen in the financial results, net $666 million of impairment, post-tax and expense provision in second quarter 24. Despite this closure, revenue is expected to remain stable as operations are being shifted to other locations and the sales are being shifted to the other locations, leading to reduced fixed cost, improved overall performance and enhanced shareholders return starting sequentially from third quarter 24. Fixed cost savings will be substantially materialized, reaching nearly $170 million per annum in 2025. As you know, the Canadian plant is shutting from 1st September, so there will be some cost third quarter, fourth quarter. The entire will be realized in 2025. However, EBITDA increase would be in the range of $150 to $160 million per annum. from 2025 onwards and some of that will be realized in 23, third quarter and fourth quarter also. Further details on these developments will be covered in the subsequent slides. Now let us take a closer look at the sales volume. In second quarter, I will achieve 3% quarter on quarter and 1% year on year increase in sales volume. which is signaling the end of destocking. As you know, 2023 was a complete year of destocking. Even the first quarter was a lot of destocking happening in Indovenia. Now we have seen a return to more stable demand pattern. This growth was underpinned by continued expansion in the PET volumes, driven by strong brand owner preferences. However, overall CPAT volume growth was slightly tempered by decrease in PTA volume due to optimization of assets, particularly in Rotterdam. These optimizations, because remember, these productions are gross productions. So that's why this gets reflected here. These optimizations are, however, overall beneficial to the cash flow and EBITDA growth, which can be sequentially seen from third quarter onwards. Indo-Venia's performance was bolstered by growth across key sectors, including home and personal care, energy and resources, coatings and constructions, partially offset by ethomines turnaround. So there was a UA turnaround, plant turnaround. This growth was supported by favorable megatrends and increasing domestic market demand. In the lifestyle fiber segment, the adverse effect previously faced due to challenges in China during second quarter 24, are expected to normalize over the remainder of the year. Diago will cover that. We should elevate some pressure and support improved performance. Additionally, ongoing supply chain disruption and high logistic costs are proving beneficial for domestic volume growth. These factors are expected to continue supporting domestic volume throughout the rest of the year. So as you can see, we have given you some number of the estimated Q3 volumes of 3.74 million tons. Now let us see our second quarter results in detail. As you mentioned earlier, we posted second quarter adjusted a bit of $370 million, an increase of 1% quarter-on-quarter and a decrease of 11% year-on-year. Remember, second quarter, 23 had a very strong integrated PET margin. Fibers, the fiber segment showed improvement year on year. However, remained stable, steady quarter on quarter, even with volume pressure in lifestyle fiber, as we mentioned earlier. Volume recovery is expected, thereby improving performance for the rest of the year. Indovenia demonstrated a strong performance during second quarter 24. We saw higher volumes and contribution margin per ton or coma per ton. driven by easing de-stocking challenges and improved domestic demand. You can see 98 million versus 70 million in the first quarter. The HVA portfolio of Indo-Venia delivered strong results, supported by North American crop seasons and therefore enhanced surfactant performance. And you know, South America will have a crop season in the second half, which Alastair will cover. CPAT, you can see experience declined in adjusted beta this quarter. from 249 to 234, as you can see, primarily due to the normalization of the NDC campaign run gain. So normally, we run our NDC in campaigns. So the quarter which we run, then we gain. And second quarter, there was impact of 20 million because of that. And also the impact of IWAL cracker outage, which I just mentioned to you, about 16 to 17 million dollars. So this all together resulted in approximately 34 million variants in EBITDA from quarter to quarter. Volume growth and our premium over industry help mitigate the impact of depressed and disappointing integrated PTA industry benchmark splits. Looking ahead, the segment anticipates improved earning in the latter half of the year, driven by reduced fixed costs from asset optimizations and benefits flowing in the Western markets from ongoing logistic disruptions. So you will see that improvements coming in third quarter onwards. It's very important to look regionally where we are in region. Of course, America still remains star here. Asia benefited from higher volume in PET and improved regional mix. Particularly, our Egyptian plant is doing very good as it applies to the European market. Though benchmark integrated PET spread, as I mentioned, went down during the quarter from 138 to 130. So, in the first quarter, it was 138. Second quarter, it dropped actually 130. As per industry publication, at current level of benchmark spreads, many producers in China are below their cash cost with negative cash flow, and there has been some shutdown of the capacities which has been announced, which Mutu will cover. The Americas region remains flat, as you can see, 257-257, primarily due to the robust performance driven by strong volumes and margins from our Indo-Venia business, This helped offset the normalization of NDC performance from one time gain of 16 million in the first quarter and 17 to 18 million dollars due to Ivol cracker outage. So this 34 million dollar otherwise the results would have been higher in second quarter. The region is expected to improve for the rest of the year with normalization of gas cracker volume as I mentioned to you. And increasing gas cracker spreads with improved shell gas advantage. I must mention here that because of the lower energy prices will also benefit in the Western world as we are seeing lower energy prices. In the month of July, U.S. cracker spread went up by 50% over second quarter 24%. EMEA impacted with lower PTA volume due to asset optimization, shutdown of PTA plant in Rotterdam, expecting upsides with reduced fixed costs sequentially from third quarter 24. So that gives you a regional snapshot of the business. Today, of course, we have an exciting introduction of our new generation leadership. You can see two people on last, Mutu and Kumar. It is with great enthusiasm that we welcome both of them as the newly appointed president and co-leader of CPAT. CPAT will run in a co-leadership model with more than 40 years of shared experience across the PIT business, spanning all key regions, two unique viewpoints and expertise. Their new appointment in July 24 gives a very significant advantage. They are dynamic. You can see and you can ask more questions. Dynamic, strong and uniquely experienced in this industry as well as being part of the Indorama Ventures. I mean, they, you know, Muthu joined us from a wool business and then he has been in America. So a lot of new ideas they should bring, focus on next generation management. As you know, we are investing in artificial intelligence integrated business model, IBP, into new way of work I'm very confident this new team will take to new heights to the CPET business. So now I'll hand over to Mutu to take over the CPET business.

Thank you. Thank you very much for the introduction, Mr. Agwal. Good afternoon to all of you, analysts, investors, other stakeholders. My co-leader Kumar and I are very much honored to be here with all of you today as the newly appointed president and co-leaders of CPET segment. Since our appointment in July 24, we have been looking forward to this opportunity to share our vision for CPET's bright future. I would like to start very simply. Our deep roots in the industry have taught us a crucial business truth, which is that PET is a great product and will continue to thrive. We will share some more strategic plans and information around that in the coming slides. Now, looking into the new organization, we are also glad to have Yash Lohia joining us as the Executive President of PETCOM Special Projects and also supporting recycling, IVIH, and bringing his sustainability expertise. IVIH, as you know, is the arm in IVL that is working on new technologies, enhanced recycling, and renewable feedstock. Now, we have carefully assembled the new CPET board, and also a 17-member global executive leadership team who together are poised to guide CPET to new heights. Now let's outline CPET's vision moving forward, anchored on four main pillars. The first one is to ensure near-term business continuity. We are ensuring a smooth transition into our hybrid, regional, and functional model designed to bring agility and efficiency to our operations. The commercial teams will continue to operate on a regional level, but closely collaborating among them to maximize the value on a global level and staying very close to our customers. And our key functions, including manufacturing, finance, and procurement, are now coordinated on a global scale and making sure that the functional expertise is strengthened across the segment on a global level. On the second, portfolio transformation, our goal is to propel CPET into becoming a top quartile cost producer. This involves continuous portfolio assessment and driving manufacturing efficiency. We have already started on this path, and you will see that the dividends are coming in very quickly. By optimizing our portfolio, We aim to enhance our competitiveness as well as operational excellence. On the third, the sustainable value creation and innovation, third pillar. We aspire to become the number one sustainable packaging provider globally and expanding our value-added specialty share as well. Sustainability and innovation are at the core of our strategy, driving us to develop products that meet the evolving needs of our customers and the environment. On the last one, enterprise transformation, we are deeply focused on enhancing global efficiency of our operations through integrated business planning, IBP, and maximizing the digital platforms and AI to become a very tech-enabled organization. This transformation will enable us to leverage technology for faster and better decision-making and and bring agility and operational efficiency. Now let's talk about why we are uniquely positioned to drive this vision forward. As I mentioned, our years across this industry show that PET is a growth industry for several reasons. Let me share this compelling case for the continued strength and stability of our PET platform. laying out the key factors which are driving future growth and how IVL's CPET is strategically positioned to succeed, even in a challenged margin environment that Mr. Agarwal mentioned. Now, looking at the global PET demand, we have seen substantial growth from 17 million tonnes in 2010 to more than 31 million tonnes by 2023. By 2030, this growth on a continued fashion is projected to reach close to 42 million tons, a solid CAGR of 4% between now and 2030. Of course, this growth is split between virgin resin, virgin PET, and recycled PET. And as we all know, RPET is growing at a much faster rate here at a 16% CAGR as compared to 2% for virgin resin. This growth shows the increasing importance of sustainability and the demand for recycled materials in developed markets, while emerging markets continue to drive this growth through population increases as well as higher per capita consumption. Several factors are driving this growth. Population growth is a major contributor, especially in emerging markets, where PET consumption is continuously on the rise. Additionally, modern lifestyle trends are pushing demand for PET products, and our expectation is that PET will continue to be the material of choice due to its several benefits including cost-effectiveness and superior sustainability profile as well as performance and convenience attributes. As collection rates for recycling increase globally, PET's role will only strengthen further. Now let's shift focus to China integrated PET margins, the reference benchmark margins that we are using for a lot of our analysis. While there has been a decline in margins in the first half of 2024, this reflects the broader market pressures we are all aware of. However, CPET is well positioned to operate in this new normal low margin environment. We are already taking proactive steps. To manage this market dynamics, through ongoing asset optimization and very focused cost reduction initiatives, we are ensuring that CPI remains competitive. Importantly, our transformation projects continue to advance, putting us in a strong position to capitalize when the current down cycle is over and market conditions improve. Here we wanted to give you an overview and a quick snapshot of our recycling business, which is becoming more and more a key part of our portfolio and continues to grow. So it is a very unique and promising venture, closely, very closely integrated with our broader PET business. And IGEL is well positioned to succeed with CPET and recycling mutually benefiting each other. As part of IVL 2.0, while reducing debt remains a priority for CPET as well, we are actively investing in sustainability and recycling to reinforce our global recycling leadership. In 2024, we will implement measures to modernize our assets, setting the stage for long-term goals and potential growth. 2024 is also a pivotal year for our recycling enterprise. We are in the process of boosting operating rates significantly. For example, our facility in France, operating rate jumped from 50% to right now 90%. We are now replicating this success across other locations as well. The learnings we had from this, now they are being cascaded and used in other locations. Looking ahead, we anticipate continued improvements in efficiency and EBITDA. Our strategy includes having strong partnerships with strategic customers for developing joint sustainability roadmaps and value creation, expanding our recycling capacity and aiming for double-digit returns on capital by 2026, as you would see from this chart. In this second, this next slide, we'd like to draw your attention to the positive momentum we are seeing in our specialty chemicals vertical. As you can see on the left side of the slide, we have made significant progress in improving our Germany specialty site, Gustafson's EBITDA. We have seen a significant 113% improvement in EBITDA performance. primarily driven by our focus on fixed cost reductions and margin improvements in our sales strategies. Here are some key measures we have undertaken and also plan to continue to effect further change. In terms of yield and plant reliability, we have minimized yield losses by optimizing scheduling, product changeovers, and improving process and quality controls. I'm also pleased to report that we have achieved sub-5% yield losses so far in 2024, and our ongoing efforts to enhance equipment reliability, ensure on-time and on-quality supply. On the fixed cost front, we already implemented manpower optimization and launched Project STAR. which is on track to deliver $7 million in fixed cost savings over 2024-2025, just for this particular case we are talking about. Lastly, our sales and innovation initiatives are set to drive further growth. We are maximizing operating rates, capitalizing on new volume opportunities. We are also intensifying our focus on high-margin specialty barrier materials and other commercialization opportunities. This is further supported by the reorganization of our commercial and R&D teams for the specialty polymers business, which is helping to enhance collaboration and boosting our product development pipeline. The next one we wanted to talk about the packaging vertical, which is now named as IndoVida. And the success and growth potential for this vertical is very high. As you can see here, we operate in eight countries with 19 industrial units, maintaining a dominant position in these key markets. For instance, we hold the number one market position in Thailand, Vietnam, and Philippines, as well as Nigeria, with market shares ranging from 15% to 56%. These countries are also projected to see P&T growth of 4% to 8%, between 23 and 26. This strong market presence allows us to enjoy consistent high margins with an EBITDA percentage margin in the high teens. And our relationship with blue-chip customers, large brands like Coca-Cola, Pepsi-Cola, and Nestle provide a very solid foundation for continued growth. By leveraging these global partnerships, we can ensure sustained demand and further strengthen our market leadership in this vertical. Now, looking ahead, our growth strategy focuses on broadening our geographic footprint, particularly in Africa, with targeted expansions into Tanzania, Tunisia, Algeria. Additionally, we also plan to expand into adjacent product categories, such as home care, pharma, beauty, and personal care, in addition to the large beverage portfolio we have now, which will unlock hidden value and facilitate even higher growth in the future. I'll now hand over to my co-leader, Kumar, who will take us through the rest of the slides. Thank you.

Thank you, Mutu. And during the course of this presentation, you've heard Mr. Agarwal as well as Motu mention IBP, which is integrated business planning. As you can see, by two of our leaders mentioning this word, it's a key leadership focus and strategic priority in utilizing digital transformation to add to our arsenal of future readiness. We have started implementing an integrated business planning IBP solution for our CPED business, It's a strategic move to enhance our global leadership in the industry in today's volatile global environment. As a vertically integrated company with global presence, we recognize the opportunity to further optimize our supply chain and decision-making processes, leveraging our end-to-end control of the value chain as a unique strength and competitive advantage in the market. This comprehensive integration from raw material to finished product positions us to extract maximum value and efficiency at every stage of production and distribution. IBP will seamlessly connect our planning activities across functions and geographies from demand forecasting to supply planning and financial projections. This integrated approach will provide comprehensive visibility into our global operations, enabling us to swiftly capitalize on market dynamics, fine-tune our inventory management, and elevate customer experience. By aligning our strategic, tactical, and operational plans, we'll make more informed decisions, drive operational efficiency, and accelerate growth opportunities. This will work in parallel with Workday to enhance financial controls, as well as Salesforce to enable profit maximization. The implementation of these tools underscores our commitment to innovation and continuous improvement, ensuring we remain at the forefront of the industry. CPET along with intermediate chemicals reported and adjusted a beta of $234 million for the second quarter of 2024, declining by 6% quarter-on-quarter and 25% year-on-year. The quarter-on-quarter drop is attributed to the normalization of the campaign run of NDC in the first quarter of 2024, while low China benchmark integrated PET spreads impacted quarter-on-quarter and year-on-year profitability. Sales volume, however, increased by 3% quarter-on-quarter and remained stable year-on-year, reflecting the negative impact of the freeze event in the U.S. in the first quarter, and that impacted our intermediate chemical business. CPAP without intermediate chemicals reported an adjusted EBITDA of $172 million for the second quarter, marking an 8% decline year-on-year, quarter-on-quarter, and a 31% decline year-on-year. The integrated PET vertical posted an adjusted EBITDA of $125 million, flat Q-on-Q but down 40% year-on-year due to depressed benchmark spreads in China and margin reset of North American contracts. Sales volume saw a slight decrease of 1% quarter-on-quarter and 3% year-on-year, influenced by lower PTH sales due to asset optimization actions in the West. The company is optimizing high-cost assets to improve performance and cash flows with majority of benefits expected to materialize in 2025. PTH volumes are flat quarter-on-quarter and increased 3% year-on-year, reflecting the weak economic conditions. Integrated Pets' global footprint and strong local presence provides a strategic advantage, allowing the company to maintain a premium spread over industry benchmarks. This position enables continued positive cash flow, even as many producers in China struggle with cash recovery or lower due to continued depressed benchmark spreads. Long disruptions in the Red Sea have led to higher shipping costs and increased domestic prices. This situation is anticipated to benefit the vertical in the coming quarters. Progress continues on sustainability goals highlighted by a new partnership with the Indian Joint Venture to establish two PET recycling facilities in India and potentially more in the future. This initiative is driven by rising demand for recycled PET and regulatory mandates. The first two facilities are expected to begin operations during 2025, reinforcing the company's commitment to environmental sustainability and and sustaining India's growing needs for recycled pet content. The packaging vertical performed well with strong volumes achieved and adjusted EBITDA of $27 million in the second quarter, a 28% increase quarter-on-quarter. The company plans to leverage its platform and customer relationships to offer packaging solutions in emerging and high-growth markets. The specialty chemicals business reported and adjusted EBITDA of $19 million in down 53% from the first quarter due to a one-time gain in the first quarter from an NDC campaign in the previous quarter, in the first quarter. On a year-on-year basis, pet HVA business grew over 100% due to actions taken to turn around a specialty PET site in Germany, which you, Muthu, mentioned earlier, driven by yield improvements, fixed cost reductions, and new product development. The intermediate chemical segment posted and adjusted a beta of $62 million in the second quarter, showing a flat quarter-on-quarter and a decrease of 6% year-on-year. Volume increased substantially by 36% quarter-on-quarter and 9% year-on-year, driven by the normalization of the winter freeze impacts and the U.S. summer driving season. However, as Mr. Agarwal also mentioned, a 50-day outage at a U.S. gas cracker resulted in an EBITDA loss of approximately $17 to $18 million. Integrated MEG spreads improved year on year with better shale gas economics, while MTB spreads in the U.S. remain steady due to tight gasoline demand. Thank you, and I'll hand it over to my colleague, Alistair.

And thank you, Kumar. So good afternoon, everyone. Indovina reported a robust financial performance in quarter two, 24, highlighted by a substantial increase in adjusted EBITDA, which reached $98 million. This marks a significant 40% quarter-on-quarter and an 85% year-on-year increase, underscoring a strong rebound from the previous disruptions we've discussed. The segment experienced a notable uptick in sales volume, up 13%, quarter and quarter, and 9% year and year. This growth is attributed to the easing of the stocking challenges, improved demand, and normalization of volume losses that had been impacted by the winter freeze event and the scheduled turnaround programs in the first quarter of 2024. In the second quarter, The HVA portfolio delivered strong results, with an adjusted EBITDA of $98 million and a 20% EBITDA margin. This robust performance was driven by the enhanced surfactant performance and the resumption of the POPG operations. Meanwhile, the Essentials portfolio reached break-even EBITDA results. in the second quarter, marking a turnaround after experiencing losses for the last four quarters. Looking ahead, the essentials portfolio is poised for a gradual improvements and potential growth as market conditions start to stabilize. In terms of sector performance analysis, the home and personal care in North America, there was a notable recovery in demand. while South America and the APAC markets have continued to show resilience with steady performance. Overall, volumes grew by 12%, quarter and quarter, and 2% year on year. In crop solutions, the North American crop season significantly boosted our sales of HVA products, leading to improved margins. Despite a 2% quarter and quarter decline in volumes due to cautious purchasing behavior, there was a 4% year-on-year increase as the stocking challenges started to ease. Margins saw an improvement driven by more favourable product mix and sustained pricing, even in the face of volume pressures. For our energy and resources segment, volume growth surged by 22% quarter-on-quarter and 26% year-on-year, fuelled by robust demand for the ethanolamines and surfactants. However, margins faced a quarter and quarter decline as a result of a strategic supply approach during our EOA turnaround, which was implemented to support our customers. Coatings and construction. In quarter two, the coatings and construction segments experienced a significant recovery after facing disruptions in the first quarter. This rebound, supported by effective cost management, strategic pricing, And as a result, the volumes increased 18% quarter-on-quarter and 14% year-on-year, reflecting the successful implementation of these multiple strategies. Indivinia's strong performance in the second quarter reflects successful navigation through previous disruptions and effective strategic initiatives. The positive trajectory across all major segments coupled with strategic innovations and operational improvements, positions the company well for continued growth. So as we discussed last quarter, Indivinia consists of a strong HVA portfolio, comprising approximately 80% of our volumes and operating with EBITDA margins of 20%. Whilst our essentials business consists of 20% of our volumes, related to more commoditized, lower margin products. but intrinsically linked to the production of our HVAs, such as oleochemical products. In our essentials business, we are creating a roadmap for improved margins. And in Indovina's HVA business, which operates in multiple markets, is driven by product launches, maintaining customer intimacy, by providing superior product solutions. Our innovation programs continue and our latest products are well received by our customers and support a strong testimony to our commitment to sustainability. In the second quarter, we recognized $7 million of licensing income from the licensing of the PO technology, which contributed to uplifting our margins in EBITDA. In terms of quarter three outlook, Sustained demand in the current businesses and growth coming mainly from the crop high season in the southern hemisphere. And the ethanol means operating a full capacity after the quarter two turnaround. Bodes well. Logistics and international freight scenarios DK mentioned might also help us improve volumes and margins in Q3. And then in conjunction with our excellence programs taking shape. Let me conclude by stating recovery is clearly visible in both volumes and margins across the end markets. Our specialities are recovering better than the essentials and agrochemicals remains a key and profitable segment within our portfolio and has recovered well in North America and the crop season which will begin in Q3 of 24 should aid further recovery in South America. I'm excited to share with you more details of the transformation program underway in Indivinia, which will drive our business forward. Our company is making good progress on recovering from the low market conditions of 2023, including the stocking challenges we faced, particularly in crop solutions. Additionally, we're poised for a return to the normalized growth trajectory with a potential of a CAGR of 3% to 7%, driven by the macro trends such as population growth and urbanization. Our continued strategic focus on capturing new business opportunities and leveraging our portfolio strengths will enhance this momentum. However, we're not relying solely on market dynamics and our ongoing transformation initiatives are crucial to our delivery. A significant part of our strategy involves re-engineering our core operations of Indovina. enhancing our agility, efficiency and effectiveness and positioning us better to meet our customers' needs. We're targeting an increase in our speciality portfolio to 40% and HVA EBITDA margins of 20% through enhanced innovation, technology, commercial and procurement programmes and through working closely with all of our customers and suppliers. We are committed to accelerating the adoption of sustainable solutions Expanding our high growth product offerings will not only align with our global sustainability trends, but also align with the needs of our customers and markets. Our core transformation programs are bringing some exciting digital initiatives to our people, processes and operations, which in turn will unlock that agility, simplification and hence value. In summary, our strategic focus on macro trends, operational improvements, market share expansion, and innovation positions us for continued growth and enhanced profitability. We're very excited about our future and look forward to providing regular updates towards achieving these ambitious goals with your support. Thank you.

Good afternoon. The fiber segment has maintained stable adjusted EBITDA quarter on quarter, despite the declining volumes, particularly in the lifestyle vertical. This resilience shows effective cost management, better sales mix, and pricing strategies that have counterbalanced the volume dip. The year-on-year growth in adjusted EBITDA is promising, highlighting successful volume expansion and operational efficiency improvements. The mobility vertical, which is our tire and airbag business, posted a strong performance with a substantial quarter-on-quarter and year-on-year increase in EBITDA. The 3% quarter-on-quarter and 13% year-on-year volume increases are a result of higher demand in China, with high operating rates and better domestic sales in the West amid supply chain disruption, such as the Red Sea crisis. Tire replacement demand, better sales mix and seasonality benefited the vertical during the quarter. The hygiene vertical, which is our diaper, feminine care, baby care business, vertical shows two different dynamics. Our hygiene fabric business is iron volume year-on-year and EBITDA quarter-on-quarter and year-on-year. while the hygiene fiber business is showing some volume correction in second quarter after a strong first quarter 24, with the first half of 24 volumes increasing over the same period of last year. Despite the softer quarter 2, the year-on-year performance is positive, reflecting a 13% increase in volumes, giving the vertical a solid foundation and potential for long-term growth. The lifestyle vertical experienced a significant quarter-on-quarter drop in adjusted EBITDA. Lifestyle is our apparel and household textile business. This is primarily due to an 8% reduction in volumes. This decline is attributed to oversupply and weaker demand, particularly in China, where aggressive production and high operating rates have compressed the spreads. However, the vertical saw a year-on-year improvement, indicating some resilience. We expect recovery for the rest of the year as market conditions are stabilizing, with industry spreads showing some clear signs of improvement in the second half of 2024. I want to come back on the industry spreads in China because this is absolutely important for the profitability of lifestyle. Those spreads had peaked at around $220 per ton in the second quarter 2022, and since then declined due to destocking by brands and overcapacity of the Chinese producer. The spreads stayed at $80 to $90 a ton for almost 18 months. Only 40% of the fiber producers in China are integrated with the refinery. The rest, 60%, had cash losses at these spreads. In mid-June, we have seen the spreads going up by $40 per ton, restoring a minimum level of margin and profitability. According to industry data, By the end of July, major plants had reduced their output by 10-15% to support the spread increase. More than 1,300 tons per day of capacity in China were shut down to lower inventory level, and this, coupled with the ASEAN freights, are supporting the price increase. So the bottom line here is we're seeing finally margin out of China spreads normalizing to historical level. As you have heard from DK, the fiber segment has set the reduction of working capital as a key operational priority for the year. In order to improve liquidity and generate the necessary funding for restructuring activities that are ongoing in the business, and to optimize the supply chain processes and eliminate the risk of obsolete inventory. We've started with appointing a dedicated senior manager to create strong accountability and focus. We have defined clear targets that were communicated to the organizations based on detailed benchmarks and best-in-class performance level. In the first half, we have already delivered and released the $52 million of working capital and reduced the gross working capital days by 11 days. We expect an additional $50 million in the second half, which will bring us the working capital days to 56. I think now I give it back to D.K.

Thank you, Diago. So amid challenging and volatile financial markets in the first half of 2024, we have proactively managed our funding requirements, as you can see, raising $1.3 billion for CapEx and investments and to refinance debt maturities and secure additional liquidity. We executed this funding at longer tenor and reduced spreads, giving an interest benefit of $6 to $7 billion per annum. Diversifying our sources of long-term financing. In second quarter 24, we have a strong liquidity of $2.4 billion in the form of cash and cash under management plus unutilized committed credit lines. And our aim is to maintain strong liquidity remains unchanged. We also, in July 24, we successfully completed a Thai baht, 15 billion baht perpetual debentures offering due to repayment of the outstanding 15 million perpetual debentures on the first call date in November 24. So this was a prior funding done, but this funds will be utilized to prepay the perpetual debentures due in November 24th. The successful transactions not only demonstrate the confidence that financial institutions and investors have in our thirds to strengthen our financial profile, but also our favorable long-term business outlook. Our debt-to-equity covenant is 2. Our second quarter, end of June, will be 1.54. So we are in a very, very strong liquidity situation. Next slide, please. Just to look at the overall debt, at the end of second quarter 24, we marginally reduced net debt from 6.84 to 6.73. As I mentioned, our net debt equity is at 1.54 and debt service coverage ratio is 1.23. Net debt equity increased to 1.54 due to optimization and the impairments taken by us, but well below our covenants of 2, as I mentioned. Our effective interest cost is at 5.85%, an increase of 54 basis points over the year 2023 due to increase in benchmark rates. However, our refinancing program is being achieved at a lower spread, as I mentioned, and probably this is the peak of the quarterly interest cost. Of our total debt, 47% is floating while 53% is fixed. By end of the year, together with refinancing, we expect the fixed percentage of our debt will come down to just above 50%. And as the records happen and the forward curve is showing reduction, this year we expect we could see our financing cost would be coming down. We'll be very actively looking at this forward curve to convert floating into fixed. We continue to maintain Forex natural hedge strategy by leveraging one of our global manufacturing footprints, having debts and net assets largely in the same currency. ESG link debt proportion remained at 32% of the total debt in second quarter 24. And you can see the long-term debt repayment shrivel after the refinancing, which has significantly come down. As I mentioned, the working capital has been a big focus. In second quarter 24, we successfully reduced our working capital days to 82, down from 86 days in first quarter 24. This four days improvement across IVL resulted in a working capital inflow of $266 million for the quarter 24. This reduction demonstrates our ongoing efforts to optimize our working capital management and enhance cash flow. This is across all the verticals as you saw Diago covering about that as a specific target. The company is continuously optimizing its capital expenditure with CapEx supporting investment in sustainability such as recycling in India and automation and digital technology as well as ongoing projects. Our disciplined capital allocation strategy continues to focus on on investments that drive long-term value and sustainability. For 2024, we have strategically trimmed down, as you can see, to only $540 million of CapEx. Out of this, $220 million has been allocated towards growth initiatives, primarily focusing on circularity projects, which are mechanical recycling, which are crucial for our commitment to sustainability and reducing environmental impact. The remaining $320 million is a mark for maintenance to ensure the reliability and efficiency of our existing operation. Looking ahead, over the next three years, the majority of our CapEx will be directed towards maintenance for scheduled turnarounds to ensure operational efficiency while minimizing downtime and maximize the longevity and productivity of our assets. At the same time, we'll continue to optimize our growth capex to fulfill our sustainability commitments and drive innovation in circularity. I think the deliberating remains the theme as explained in Capital Market Day. So if I summarize, what is the summary? Looking ahead to second half 24, we expect continued growth in the volume as we showed you across all segment as destocking comes to an end. However, The depressed benchmark spreads are continuing, impacting integrated PET business and polyester fiber business. In the U.S., lower ethane prices because of the very low gas prices and frack margin, and winding shale gas advantage will support ethylene crack margin to continue in a positive trend. Indovenia operations, as explained by Alastair, are progressing as planned and are on track to deliver a strong performance, which is in line with the leading specialty peer companies, delivering on innovation and producing sustainable and high-value solutions for various industries. Ongoing trade disruptions and high freight cost is helping to keep demand for domestic production high, which supports IVL's geographically diversified business model. Asset optimization and impairment taken in second quarter 24 have paved the way for operational improvement. This will streamline our operation and enhance our financial efficiency moving towards. We project a sequential reduction in fixed cost starting from third quarter 24 and fixed cost saving of $170 million per annum to completely materialize in 2025, which will basically translate into an EBITDA improvement of approximately $150 to $160 million per annum. So that summarizes my presentation. I think now we can take the questions. Thank you.

Thank you. So audience, you can ask your question now. You have two options. Either you can raise your hand and I invite you to ask your question. So I can see there's one hand raised. So can you please unmute and ask your question?

Hi, Vikas. Can you hear me?

Yeah, I can hear you, Pat. Please go ahead.

Okay, thank you. Hi, this is Pat from Moon Capital. Thank you for the opportunity. I have just two questions, one for TK and another one is for Muthu. TK, you mentioned in your initial remarks regarding the freight tailwind, which will be helping you on the pricing of the CPET segment. I was just trying to understand what is like If you can put a number on this particular tailwind as regards your volumes in North America as to how much of an uplift you see on the pricing side in pet. And my second question is for Muthu. Muthu, you mentioned in your slide 13 regarding the relative market shares in some of the countries where you operate. But could you perhaps spell out what is the fair market share for Indorama in North America, please? Thank you.

Thank you for the question. So the freight tailwind, as you know, the freight rates have been very high. We see Europe benefiting from it in the second half. We also see Brazil benefiting in the United States and Europe. Mexico, because where we have majority of the contracts are 80% of the contracts. In the revision of the new contracts, as we go for negotiation, we'll have improvements. The volumes, we'll also see, I will ask Muthu to answer that, how much volume growth he sees, along with the answer to the second question. Go ahead, Muthu.

Thank you for the question. Now, just to build on the freight, what we are seeing is that We expect the freight rates to continue to be at elevated levels through the rest of this year. And based on the structure of the contracts we have, we will also get lag impact, a lot of it coming in third quarter and fourth quarter. Another aspect is what Mr. Agarwal was hinting to, that this will also help our new contract negotiations, renewals that are happening for 2025 in this situation. Now, to answer the other question on the market share, in North America, we have close to 30% market share. Of course, we look at it as virgin as well as recycled PET, and we are trying to sustain our market share in the total PET space. Hope that answers your question.

It does. Thank you. Thank you for your answer.

Thank you. I can see that there is one question here online, so I'll just read out the question. It says, how long do we expect Chinese players who operate at a loss to continue operating before some of them or majority of them to close?

Muthu, I think it's a good time to answer this question from you, correct?

Well, we are not sure if all of them will close, but there are certainly some trends that that we are seeing. One is, I think in the previous analyst presentations, we have shared that the effective capacity addition in China. But we see that that is picking out in 2024. And we see significant decline in this effective new capacity additions starting 25, 26. So that should help the overall situation. Although the overhang continues to be there, operating rates are still depressed. But the slowdown, in addition of new capacities, that should help the situation. And similarly, what we have seen, you would have also seen from the releases of the other companies, especially the refinery companies, that the refinery spreads have started reducing. And that we believe because what has been happening is the integrated oil to chemical players, they have been subsidizing downstream spreads since the refinery upstream spreads. You will see in this slide the red line that you see has been down as compared to the previous years. So with this drop, the level of subsidization of the downstream spreads is likely to reduce. And these two factors should help the situation. Now, of course, we are monitoring this closely, and as we shared with you earlier, we are not really depending on increase in spreads for our business recovery, but we are diligently working on other cost and working capital reduction initiatives to make sure we are fully prepared to continue to thrive in this challenge margin environment. Thank you.

Thank you. You have that slide of protected market, right?

We can also show this slide on the China capacity.

Why don't you explain this slide? The capacity. No, no, this slide. As you can see, this slide. Can you go ahead and explain this slide?

Yeah. This talks more about that even with China building new capacities, how we are trying to insulate our key markets, IVL's key markets where we have a global footprint, how we are trying to insulate these markets and continue to sustain our premium over the benchmark spreads. whether be it in Asia or Europe or Americas. And you can see that just in 23, we had an exposure of almost 44% of our markets open to China imports, whereas here, Chinese imports, now it has been brought down significantly to 20%. And you'll see many of the trade measures that are being worked on on the right, all the key markets, including in India, in Brazil, Americas, and in Europe. And just this week, India announced additional measures in trying to increase the anti-dumping duty on one of the producers where they had low anti-dumping duty. So that will go up further. So we are continuously working on various trade measures, be it on tariff or non-tariff barriers to make sure that we are able to mitigate the impact of the depressed benchmark spreads. Because we can also look at the other slide, the China capacity. So you can see here, this is what I was referring to earlier. So you see the large increase in the capacity buildup. Of course, a lot of it was driven by the considerably higher margins in the previous years, and all those were getting commissioned in 23, 24. But looking at the recent situation, then you will see that there is a very sharp decline in the net capacity being added. So this is going to, and we believe that this will continue to, you know, happen in the outer years as well. So this is going to change. Certainly, we are hoping that this will help the situation to improve the spreads. Hope that answers your question. Thank you, Madhu.

Thank you. I can say that there's one more hand raised. Can you please unmute and ask your question?

Hi, this is Sumit from J.P. Morgan. Thanks a lot for the detailed presentation. I had actually the same question that was asked earlier, but a follow-up on that. Could you please help us understand the... the health of the industry and the reason why I ask is Indorama seems to be taking a bit of a lead in terms of rationalizing of supply. If I Take the Canada and Spain sort of PTAs at one plus million tons, which is almost 2% of global capacity, I believe. So a significant capacity decision you are taking. But are there any peers who are also taking similar decisions which can help improve the industry better? So that's my first question. And my second question is on the sustainability of the Indovina performance, which was quite healthy at around $100 million EBITDA. Should we expect that to sustain going into next few quarters? And what will be the key drivers to see potential improvement there? Thank you.

Yeah, thank you for the questions. I think I'll just take the first. You're right that Indurama has been taking, because you saw that our utilization rate was quite poor. So we took decisions to rationalize and remove the fixed cost structure. Europe still remains a deficit market for PTA, and it's better to buy and import rather than producing. I think, you know, there's one competitor who has said, shut down a smaller line in US and Mexico we are not seeing anything but overall then market industry utilization rate is improving so this is overall helpful for the industry you want to take the individual question Yeah, sure. Thanks.

Well, look, if we look at what happened in Q, yes, go back to that slide. It's not a one-off spike that we're seeing in our performance. We went through the 2023 trough at $53 million. You could see two quarters in a row where the whole of the industry basically bottlenecked up. Q4 was a good result, and we started seeing some improvements. I think Q1 would have been even better. Obviously, as you remember, we had a scheduled turnaround and also the winter freeze in Texas. So I think that result would have been a little bit better. And then hence we come to the 98 result that we got today. And it's not a story of one lever that was pulled. I think what we're seeing is demand is recovering in the home and personal care sector. And I think demand in APAC and in South America has always been strong. It never really reduced in 23. So I think that's an ongoing story and a good base to our business to say that should sustain moving forward. I think when you look at construction and coatings, I think we had a good quarter. I think you saw some impacts from the high freight rates. Customers that were trying to import products are not trying to import products now. They're coming back to us because of our locality and reliability in the southern hemisphere. So I think you're seeing some very meaningful gains there. And I think you're also seeing the return of the POPG plant and capabilities coming back to the marketplace after the turnaround. So I think that was good to see. I think in... Fuel and lubes, good increase. Our customers have come back with high volumes, maybe linked to a lot of the logistics going in a lot more journeys now around the capes. But we're seeing really good demand coming through there. And I think coming to crop solutions, I think for the first time for a few quarters, we've seen a return to the crop market. solution market in the northern hemisphere, and inventories are dropping off quite significantly. I think when you move to the southern hemisphere, and that's the one we're really waiting for because it's 25% of the South American volumes, a very interesting story. We're seeing... I think, high crop and high crop export rates from South America. So the volumes are certainly there. I think one of the problems you've got is low food prices. They are dropping and crop prices are dropping. And therefore the squeeze with high interest rates on the downstream producers and the farmers are quite extreme. Their margins aren't there like they used to be in 22 when the stock built up. So I think what you're seeing is a delay, delay, delay to the last minute of buying. And they've got to buy. There's nowhere around the herbicides, insecticides, pesticides. You have to have them or you're going to reduce your yield. And therefore, I think we're starting to see volumes come back. I think you might see a higher volume than we historically have seen because there's just no stock in the system. So we've been talking internally about how do we respond to a very high demand rate or a very high signal that we could see. And we're giving ourselves up ready for this demand response. So if I look forward into... I guess, half to. What do I see? I see some normalization coming back. It's not perfect yet, but it's a lot better than it was in 23. So I see a lot more normalization starting to happen. I see crop starting to come back, and that would be a big impact for us, especially for the South American region. I'm seeing our EOA facility, TAR, is now complete in Q2 with one of our EO reactors. So that's behind us now. I'm seeing some annual shutdowns that we had in South America behind us now. So we've got good volume capability. I think as DK and Mutu said, we're seeing high freight rates. So that's some protection in some of our more regional markets there. I think we're seeing some inflationary reductions and environment. And I think we're continuing with our transformation programs. So am I naturally bullish? No, I'm naturally cautious. But am I seeing good performance continuing into quarter three? I am. So I think it's going to be very interesting to see how the market – we've been reading all of our peers, and I think they're a lot more cautious than we are. And we're seeing good volumes. So let's see how the next quarter goes and the rest of the year. Good. Thank you, Alistair.

Thank you. Thank you.

Sorry, if I may have a follow-up.

Yeah, please go ahead.

Yeah, sure. So just on my first, and thanks for the detailed answers, but on the first question regarding the health of the industry, I want to understand better where the, how should I say, marginal sort of spreads will lie going forward because we used to think that the the break-even for an integrated business, integrated PET business would be around 200 plus. We are at currently 130, which is really uneconomical. Would it be fair to say still that the break-even must have come down for the industry or is it still 200%? Just want to get your thoughts on a medium-term basis.

Thank you. Yeah, I think so. If you're referring to China, can we bring that Chinese margin slide? I think as Mutu was explaining, most of the players are losing money. We recently saw 5 to 6 million tons capacity being shut down. You see on the top line, number two, that the integrated spreads are much lower. You saw the same phenomena in Fiberside, which Diago explained, and we saw some rationalization. As bottom, you can see the 70% capacity is owned by four players, and one of them is integrated with refinery. As we were explaining, they were subsidizing from refinery to downstream PETs. I don't think the break-even point has reduced significantly, maybe $10, $20. At these margins, they are making significant cash losses. Those are standalone if they don't subsidize and look at margin. So we have to wait and see because there is a big overhang of the capacity. You can see the left-hand side of China's PET operating rate, where it stands. Their exports are growing but limited because of the protection rate. So it is basically how the Chinese margins move. But the health of the industry is not good in China because they are bleeding. Those who are standalone, how they can sustain those. And that we saw in fiber industry, same, that there, you know, the price is improved by $40. But our strategy is more, as you saw, that operate in those protected markets. In those, we have first volatile cost curve. By rationalizing these assets of high cost, particularly Rotterdam, we have taken steps basically to move on the left-hand side of the curve. Particularly, as you know, we have Poland, Egypt, Turkey, Lithuania, which are highly cost-competitive assets. We have resorted to PTA buying rather than making, which were more expensive in Rotterdam. So we have fixed our cost structure. On that side, as far as American market is concerned, we are first quartile. You know that we had reported you would ask about the health of the industry. Even one competitor shut down one of the plant Cooper River earlier. So there is rationalization in the industry happening. U.S. is still a deficit market, which is predominantly supplied from non-Chinese market, which sells at premium. Europe also has anti-dumping so I don't think Chinese industry can last such long for such spread but it is to be seen you know Chinese is how the spread evolves but health of the industry as a standalone I won't be is not good and as the refining margins comes down probably they will not be able to subsidize anymore you know so let's keep fingers crossed maybe yeah

Just to add also what Mr. Agarwal was talking about, the China capacity, even though the new capacity is getting added in PET, but it is also to be noted that because of the deeper spreads, some of the non-integrated players are taking out capacities, at least on a temporary basis. This year, in the recent months, about 4 million tons of capacity has has not been running on a regular basis. Now, of course, we do not want to speculate to the earlier question also that whether they will get permanently taken out. That we do not want to speculate. But this shows that how difficult the current spreads are, even for Chinese producers who are not fully integrated. Just wanted to highlight that. Thank you.

Thank you.

And very, very last housekeeping question.

Sorry.

The Canada PTA shutdown. Right. After that, who which where will you get your PTA for U.S. from? Is it going to be merchant?

You want to answer to that?

Yes. So we do have a large PTA facility in Alabama, Decatur, Alabama. And we are able to increase, you know, one of the main reasons why we've been doing this strategic review is the operating rates have been impacted because of various factors, be it on feedstock cost or the demand. So through this action, we are able to maximize, take our rates in the Alabama facilities to full. And some of our other needs outside of U.S., markets where we have some PTA needs, we are able to competitively, reliably source PTA as well. So with these two, we are fully secured on our PTA needs. Hope that answers your question. Yeah, absolutely. Thank you. Thank you.

Basically, concept is utilize assets at full, reduce the variable cost and reduce the fixed cost and be cost competitive.

Thank you. I can see more hand raised. So can you please, Yupapan, if you want to go ahead first from Thanachal.

Thank you, Ka. So I have a question regarding PTA asset. Is it possible to tell PTA capacity after asset optimization? And I just want to make sure the competitive test of the remaining PTA plant, is it still making profit at this level of margin or just break even, Ka?

Do you want to take that question? So that's a good question. So in the United States, as Mutu mentioned, we shut down the Canadian plant. We still have a million ton of PTA capacity integrated with Perazalin. It's a cost competitive in the sense that it is in the U.S. margin contest. In Europe, we now have basically a Spanish facility which is integrated with IPA PET. So cost structure is reasonable. Best is on buying basis. You know, in Poland, we have co-located with a PTA producer. So we buy much cheaper PTA. For Turkey and Lithuania, we are importing from Korea or other countries or captively. Asia, the three PTA plants which we have are not in the first, immediately I would not say that they are the most cost competitive but yes they serve our captive supply and as you remember we had taken an impairment of one of the Asian assets but we are running because we are able to supply in Indian markets. So rest of the PTA capacity I would say is now meeting our captive requirement and cost competitive in those respective regions. And capacity will be about 3.8 to 3.9 million tons.

Thank you. Do you have any follow-up question on this? No, thank you. Thank you. I can see from Bank of America. Raise your hand.

Hi, can you hear me?

Yeah, please go ahead.

Okay, thank you for the presentation. I have questions for DK. Can you add color on the distribution of saving, EBITDA saving in the second half of this year in Q3 and Q4? Because when you close out the plans, then there should be fixed cost savings. And second question is for the gas cracker. I assume that if it is running, it should be having EBITDA. What was the reasonable EBITDA that we expected? And the last one was in the vineyard, can you remind us what was the quarterly EBITDA in the past during the normalization? Thank you.

Yeah, so the Rotterdam shutdown in Q2 and you still have residual costs in Q3. As you can see, in 25, we will have a fixed cost saving of 170 million, which is basically improvement of 150, 160. So you will see impact in Q2 about, I would say, 15 to 20 million dollars. Sorry, Q3 and Q4 will be about 30 million dollars quarterly. But in 25, then we'll realize the full impact. savings of fixed cost. Eyeball cracker, you know, today the crack spreads have become 30 cents per pound. It's never seen in the past. We just started the cracker. If such type of crack spreads remain, and let's understand why these crack spreads are so high. One is, of course, there are shutdowns in U.S. There is export of ethylene. You can see on this curve here that shale gas advantage, how much it increased. This is July 568. But as I speak to you, it is 640 because of the lower gas prices in ethane. If these types of spreads remain, which is difficult, that, I mean, those such high spreads will remain, but even in 25 cents or 26 cents, we had impact, negative impact of 17 to 18 million dollars. I think quarterly, this, don't hold me to it, but 20 to 22 million dollars EBITDA can be made. Another important thing is MEG. As you can see, We have to look at long term. There's not much capacity addition happening in United States because it is too expensive to add the crackers today. The construction costs are high. You can see right hand side, the global capacity utilization will improve from 80 to 82 percent and North America, 79 to 84 percent. And whenever there are some turnarounds and disruptions, you see this crack margins going up. You can see continuously this crack margins are improving. This not only benefits IWOL, but also benefits Indovenia because Indovenia also has a cracker of their own for captive supply of ethylene and some of their contracts are linked to ethylene. So it is overall beneficial for all of us. Third question was on Indovenia. Can you take that?

Yeah, sure. So if I look back the last three years, 21, 22, 23, average quarter two, I'll give you a specific quarter. Our normalized run rate is about $112 million a quarter. I think if you look back to those historical numbers, that would have been broken down to about $94 million for HVA and about $18 million for the essentials business. So as you can see with our performance of 98, we've actually achieved on the HVA business now a number exceeding where we've historically been able to run. I think it's the essential business we need to give some attention on and look at how we can improve that. It's running at basically zero versus 18. It has improved quite significantly quarter and quarter over the last few quarters, as you see there, negative seven, negative one, and then a zero. We've got some way to go. So our intention and our strategy is keep improving the HVA business, see if we can improve the essentials business that goes with it. So it's a tale of two sides. I think the HVA business is exceeding historicals, and the essentials business has some way to go yet.

Commissar, did it answer your question or any more questions you have?

Yes, thank you very much. Thank you.

Thank you. I can see you have one more follow-up question.

Yes, I have one more question. Actually, regarding the cost improving after impairment in this quarter, should we expect cost in other sites increase as well? Is it possible for you to guide the net cost saving after including higher cost from other sites as well?

So actually, there is no higher cost in terms of fixed costs because, you know, those assets were underutilized. Do you have that utilization pro performa one? So basically, what is that entire our IVL system was utilized at 79 percent. And if you remember in capital market day. So this gives you some idea that basically the volumes are. remains sort of a, you know, first half of FOMA and lies after optimization is 13.5 and you can see actual is 14.1. But if you would have sundown these assets earlier, then this would have been the production. The fixed cost has come down lower by 170 and the ROCE has improved by 8.4%. So there is no fixed cost increase because those assets where these volumes are getting transferred are actually underutilized. And the incremental variable cost is nominal and then you have maintenance cost coming down from 268 to 250 because those plants which are shut down you conserve the cash on the maintenance so this will be lower by 25 million dollars and depreciation also comes down because we have taken impairment and you can see the Rosy improvement so there is no because those assets will run harder so there is no fixed cost increases only the variable cost which is also competitive as compared to the shut down assets I hope that helped you.

Yes, because I see that the fee cost reduction is quite big compared to EBITDA. So I just want to make sure whether that can be in the bottom line.

So basically, as we told you, 150 to 160 million EBITDA impact comes in the 25 because of only the fixed cost reduction. Okay.

Okay. Thank you. Since we are on this asset optimization subject, I can see there are some questions in the chat box. I'll read out for the speakers. So after the asset optimization is complete, how large do we expect EBITDA per ton increase or percentage increase? Even the benchmark prices remain the same.

A very good question. I think the whole principle of this, as I was mentioning, was reducing the fixed costs, utilizing the asset rates higher, will certainly translate into EBITDA per ton improving. A rough calculation shows that it should improve by $15 to $16 per ton. In percentage form, it should go up by 1%. And it's some make or buy decisions. As I mentioned, we can source very cheap PTA. So that's what is the strategy to source cheaper PTA from Korea and other countries and China for our operations in Egypt and European. So the whole strategy of this asset optimization is to move the cost curve on the First, left hand side and reduce the fixed cost and have high operating rate without losing the market. So I think this would be the improvement. That's the only two parts.

Yeah. So there's a follow up to that as well. So this is from Kungsi. So what were the fixed cost of these plants and what were the operating rate before we optimized these plants?

Actually, these plants were operating below 50%, around 55% or lower. But like Rotterdam, we had not run this one PTA line for the last entire year. So we're running at 50 percent. So they were operating at very low capacity. So that was a former operating rate. And in consolidated, you saw the operating rate, how it is improving.

OK, and this is the last one on the chat. What I see is again related to this asset optimization. So in the financial report, we saw that asset impairment would be $540 to $550 million. But in the financial statements, it mentioned $25 billion. So what is the key difference? So you'd like to understand how the tax adjustments and all that.

So gross impairment is $726 million. Basically, there's a deferred tax asset created 180 because we'll be able to claim all this tax losses in our different countries. So net is 543. So that's non-cash, 543. We have made an expense provision of $123 million. This is towards severance, clearance, demolition, net of salvage value. We have not taken the gain on the property because there are some in Australia, like there is a significant realization of the property. Same is in Canada. This will run net nearly about $110 million, which will be accounted when we have, Basically, the cash is realized. So that will be realized later on on cash basis. And this one twenty three million dollars, which provisions we have made cash basis will be incurred over next few months. And of course, we'll have cash release coming out from the working capital reduction in those sites. So that will also help in that. Yeah.

Thank you. So I can see a surgery from Greyhound to have a question. You have got a hand raise. Can you ask your question now? Okay.

Hi, can you hear me?

Yeah, just go ahead. Yeah.

Yeah. I have a couple of questions more on the asset optimization. I think one of them you partially answered, but perhaps not really. I noticed you have impaired $666 million this quarter. I thought that you mentioned earlier in the previous quarters that there's a maximum of $500 million more to go for impairment, and then we're completely done. So first question, you know, why is it more or did I misunderstand something? And then furthermore, are there any other assets that are continuously losing money and operating at similar levels at 50, 60 percent neutralization rate? And do we need to see more, potentially more shutdowns to optimize it in the coming years or quarters?

So, I think there's $500 to $550 million, if I remember, indicative, right? Yeah, but that was expense on top. Expense on top of it, right. So, there's $124 million is the expense provision. We have basically come to a significant portion of the material restructuring to an end. We don't see any material impact coming in at all. In CPET, as you know, we have taken out so much PTA capacity and also PET capacity. We moved to the first quartile, so we don't see any further impairments. Fibers also, this includes two fiber sites. So we don't see any material impairment coming in. And that's why everything is taken into this quarter. And all the actions have been so that we can materialize our fixed cost saving at earliest.

Yeah, if I may follow up on that, are there any other assets that are right now that that you haven't impaired yet that are operating consistently at suboptimal levels? And even a market turnaround would not necessarily improve them significantly.

So let us do segment wise. In CPAT, we don't see any assets at all. In Indovenia, you saw the Australian assets, which was primarily not because that was not competitive. It happened because our athlete supplier, Kinos, went shut down his facility. And that's why we had to bring down. We are bringing into a trading model. Indovenia entire asset portfolio is competitive. Very cost competitive, as Alistair was explaining. Fiber, also we have done most of the sites. So we don't see any material. Single fiber site may be there, but there's not material, I would say. That would be the way you will have to put it. And Diago is already working on certain transformation actions. So you can be assured that there's no material thing coming. Yeah.

And this $110 million that you potentially can gain from the property gains, is that going to be added back at some point as a profit?

Yes, that's correct. So in Australia, this is located near to the residential area, and we see a significant property value, as I said, but we'll have to demolish our residences. Our team is working on it, and it may take a year or a couple of years, depending on the way we dispose of it. Similarly, in Canada, also we see a value coming out. These are all freehold lands, and it will be accounted on the cash basis when it is realized as a gain. Got it.

Thank you very much.

Thank you. Audience, if you have any more questions, you can ask them now. I don't see any more hand raised, and I don't have any more questions. But if you have any questions, you can ask them now.

Okay. Thank you. Thank you very much. I think it has been a nearly long time. We really appreciate your time on the Friday evening. And thank you very much. Enjoy your weekend. Thank you. See you.