Indorama Vntrs Unsp/Adr

Good afternoon, welcome and thank you for taking time to join us for Indorama Ventures third quarter's 24 results briefing. My name is Vikas Jalwan, Vice President, Investor Relations and Planning at IGL. Joining me today, we have Mr. D.K. Agarwal, Deputy Group CEO and Group CFO, Muthu Kumar and Kumar Radha, Presidents and Co-Leaders for CPAT, Alistair Empord, Executive President for Indovenia, and Diego Brawley, Executive President for Fibers segment. Quick disclaimer that this meeting is being recorded and a replay of this session will be available on our website after the meeting. Of course, we have made a few assumptions and estimates on future trends for our industry and business, which are based on analysis of available information at this point in time. So with that, I now invite Mr. Agarwal first to share business and financial highlights for third quarter. Over to you, please, Mr. Agarwal.

Good afternoon. Thank you, Vikash. I think let's first discuss the macroeconomic backdrop, which is directly or indirectly impacts this industry as well as our businesses. We always bring you the slide. In third quarter, the U.S. experienced a slowdown in growth, while economic condition in China remained lackluster with poor domestic demand, as you know, with the housing bubble which they have. Geopolitical uncertainty and a cautious economic outlook are causing continued overall softness in the world, except India is a sweet spot where we see good growth. Freight rates remain elevated due to disruption in the Red Sea and making imports expensive. As you see this graph, after slight decline in October, we have seen 15% increase in Shanghai Freight Index in last couple of weeks. Crude oil price declined to $75 a barrel in September, leading to some inventory losses, which you will see in our reported EBITDA. However, low gas prices are sustaining the U.S. gas advantage. You are all aware, recent U.S. elections saw the strong win for Republicans, and this will support U.S. economy in coming few years. IVL being a local producer in the United States with around 40% revenue and 51% of EBITDA is expected to benefit with likely increase in tariffs as you have seen the new administration announced that there will be increase in tariffs even from outside other countries, China as well as other countries. Reduction in corporate taxes and lower shale gas prices with more ONG production as they say drill baby drill. Though FED has recently reduced 25 basis points, but we expect the pace of rate cuts might be a bit slowing down forward due to inflationary fears. As you know, the treasury yields have gone up. So, there is inflation fear and we may see how things move in the coming quarters. Now, let me walk you through the key highlights in financial for third quarter 24. This is after consecutive eight quarters of low performance. Indorama Ventures achieved an adjusted EBITDA of $427 million in third quarter 24, a solid 15% increase quarter on quarter, and 32% increase year on year, driven by study volumes. As you can see, the volume growth is only 1% year on year. Cost reductions laid by proactive actions, which we detailed out in CMD, and improved benchmark spreads across all segments. This quarter makes the first year-on-year improvement in performance for the year following, as I mentioned, prolonged period of challenges related to destocking and the industry down cycle. This signals recovery moment across all three segments, as you will see the performance of three segments. The company has demonstrated that our diverse global business portfolio enables resilient results through different market cycles because of geographical and product diversification. End product demand remains robust, keeping our volumes intact. PET and fiber volumes have remained steady through the years, while actually Indorevenia experienced peak season in the crop solutions market. If we look at reported EBITDA, reported EBITDA was affected by a 38 million inventory loss this quarter, largely due to decline in the crude oil prices, as well as perazoline prices. As you know, perazoline margins collapsed, and that resulted in our valuation of inventory being lower. Additionally, our operating cash flow was lower in third quarter 24, impacted by net working capital outflows resulting from increased inventories, including in transit due to extended lead time from ongoing supply chain disruptions. As you know, we import PTA in some of our European locations. I'm very pleased to inform the company has made substantial progress on initiatives online in the IWL 2.0 vision in line with expectation, focusing on deleveraging and improving quality of funding. Management's relentless focus on cost is beginning to yield results. The asset rationalization program that IVL took action on last quarter has begun delivering fixed cost savings of $19 million this quarter and sequentially increase as into the next year as the full benefit of $170 per annum is fully realized in 2025. As you know, we shut down the assets in different timings, so the full benefit will come in 2025. It is important to note that the out-time actions for the CPAT and Indovenia segments has now been completed with FIBERS yet to be implemented. Diago will cover that what actions are being taken in FIBER and probably $40 million of additional savings will flow in 2025. Operating rates for the group increased from 69% in third quarter 2023 to 82% this quarter. And for CPAT, they increased from 69% to 84% in the same period year. This program aligns with our long-term strategy to optimize the asset base as we go into first quartile cost of production, improve operational efficiency, and strengthen profitability over the cycle. As I mentioned, fiber has made concerted effort over the past year to reduce fix across the entire portfolio. This is before the rationalization of any assets, which as I mentioned. In addition, within the hygiene and mobility verticals, management took aggressive actions to gain back lost market share through price adjustment by enhancing volumes and reducing costs, including improved utility costs significantly over the years. We continue to be a market leader in our key areas. And once volume capture and cost structure initiatives are fully stabilized, Mandarin will shift its focus on further margin improvements. So we really see a big journey in the fiber and an improvement going forward. I am pleased to inform that our digital journey has accelerated the implementation of a digital core in the form of S4HANA. The company is engaged in the implementation of our digital initiatives, which are progressing in line with the schedule. North America is already benefiting from a new AI-driven source-to-contract solution in the procurement excellence journey. Our manufacturing excellence program has started to bring in results by improving our workforce productivity through our connected work platform. The first supply, sales and supply chain solutions are expected to go live in first quarter 25. We have strengthened both existing and new partnerships to expedite value delivery throughout the entire organization. Moreover, significant efforts are being put into changes management to facilitate smooth transition and ensure the adaptability of our workforce to new processes and technology. So this is the beginning of our journey for digitalization. Underpinning the company's resiliency in the management team to this end, this year, as you know, company has initiated pivotal changes in the organization structure. In order to sustainably drive the initiatives under IVL 2.0 and growth beyond, company is creating focused and dedicated management teams across each of the businesses, led by empowered and accountable leaders. We have nearly completed the restructuring of Seapade Fiber in Indovenia and further restructuring is in place. These transitions push operational delivery to the respective businesses, leaving a leaner corporate that is reducing the overall cost and that will focus on strategic delivery. As we look ahead, the global economic environment still remains uncertain with potential impacts from continued inflationary pressure, geopolitical tension and supply chain destruction. However, as we rolled out in our CMD, our strategic focus on cost management, asset rationalization and leveraging market opportunities through our global network position as well as to navigate these challenges and capitalize upturn as economic conditions improve. We certainly see the trough behind us and we see the recoveries happening. In line with our IOL 2.0 plan, Indorama Venture remains committed to enhancing the quality of earning, creating free cash flows and driving value creation across our stakeholders. Now let us look at closer look at the sales volume. In third quarter as you can see overall sales volume was stable at 3.54 million tons year on year and lower 3% quarter on quarter due to lower PTA volumes from asset rationalization. As you know we count PTA in the volumes. Now PTA assets have been rationalized in Europe. However, end demand for PET, endovenia and fiber products remain strong. If you look at CPET volume, decline this quarter mainly driven by lower PTA volume, post-asset rationalization. As I said, it is make or buy decision. We are buying PTA rather than making it. As we progress further with this rationalization in Q4, PTA volumes are expected to remain lower. However, steady PET demand even during the traditionally low season is helping to balance the impact and maintain stable CPET volume. So basically we have migrated from high cost to low cost countries like Turkey, Lithuania and Poland. Indo-Venia volume shows continued recovery with a 10% year-on-year increase after destocking has come to an end as you can see from the volumes here. Fiber volumes grew 1% quarter-on-quarter driven by increased demand in hygiene and lifestyle verticals despite a seasonal slowdown in mobility volume during the holiday vacation period in Europe. Looking ahead fourth quarter, we expect higher lifestyle volume, particularly in Asia as demand sequentially recover. You will see that lifestyle and PET margins have improved, which is helping. American volumes are expected to be stable, but lower due to PTA rationalization of Canada assets, which came in fact from 31st August. Now, this is just an update on what is happening on our strategic action. This quick snapshot summarizing the update on strategic actions starting with asset rationalization program. In second quarter of 24, we executed a comprehensive asset rationalization program aimed at strengthening our asset base, improving cash flow and enhanced quality of funding. We shut down high cost PTPT assets in Rotterdam. PTA acids in Canada and ethylene oxide acid in Australia as the upstream ethylene supplier shut down. And others where impairments are already taken in second quarter 24. As we told you, these actions are already yielding results with initial fixed cost saving of approximately 19 million realized in second quarter 24 on track to reach annual saving of 160 to 170 million dollar by 2025 as rationalizations materially take effect. 14% of targeted manpower reduction achieved in third quarter 24 and rest to achieve by 2025 plus other fixed overheads. Alongside this cost saving, our actual EBITDA enhancement, we expect to about $140 to $150 million by 2025. Operating rates will improve to, as I have already seen, 82% in third quarter 2024, reinforcing the positive outcome from our rationalization efforts. Other key financial targets include improved ROSI, higher return on equity, and together with reduced depreciation and maintenance capex. And we remain committed to delivering all the KPIs announced under this initiative and will provide you a regular update on the progress. Please note that we expect to realize around 120 to 140 million dollars from the sale of land and other properties in impaired assets in 2025 or early 2026, which is to be accounted as income on receipt of the cash proceeds. This question has come from few of our investors that what will be that saving and that we think 120 to 140, but we will account that when this is cash realized. Next slide. Another important is the unlocking the value, so progress of IPOs and divestment. Starting with IPOs, we have made significant progress in preparing two major businesses for public listing. First, our downstream pure play business of IOD, which is known as Indovenia, now branded as Indovenia, has reached a critical mass and is well positioned for a public listing as soon as market conditions are favourable. Targeted for first quarter 26, Indovina is currently in the reorganization phase with pre-consultation initiated with market authorities to ensure alignment on regulatory requirements and timelines. Similarly, Indovina, our rebranded packaging business, is also advancing towards an IPO targeted for fourth quarter 25. Preparation are underway with the consultation with the financial advisor. These two IPOs are expected to raise a combined $1 billion. For non-core divestments, we have two key projects, Lusture and Cobra. These are profitable operations with existing interest from buyers. We aim to complete this divestment by fourth quarter 25, targeting a proceeds of around $300 million. These updates reflect our commitment to 2026 target established at the beginning of the year, with each project progressing towards its respective milestone. We remain focused on executing our strategy and will continue to keep you informed of further progress in the quarter's end. So, this was an update on IOL 2.0 on asset rationalization and unlocking the value of subsidiaries. Now, let us see our third quarter results in more detail. In third quarter, we posted an adjusted EBITDA of $427 million, highest since third quarter 2022. With a 32% year-on-year increase, driven by steady volumes, cost reductions led by proactive management actions, and improved benchmark spreads across all segments. We have seen the improvement in the fiber spreads and integrated PET spreads. Quarter on quarter, EBITDA rose by 15% with higher contribution from all three segments. You can see $370 to $427 million. Demonstrating an operational improvement, effective cost-saving initiative, and more favorable market environment. CPET experienced significant growth driven by resilient PET demand, higher China benchmark spreads, and fixed cost-saving from asset rationalization. Looking ahead, the segment expects improved earnings next year, Supported by further fixed cost reductions from their asset rationalizations and better margins as you will see in the coming slides. Indovenia continued to deliver a strong performance in third quarter 24. You can see sequentially first quarter was 70, second quarter 98, third quarter 106. Driven by increased contribution from high margin crop solutions due to seasonality in the Americas. Alistair will cover this in detail. Fiber showed positive momentum with improved lifestyle benchmark spreads, particularly polyester staple fiber in China, and enhanced fixed asset productivity through management action. So, this covers your IVL by segments. Now, it is also important to look at regional EBITDA. You can see from 427, nearly $307 million is coming from Americas. Americas means United States, Brazil, Mexico, Canada. So, all the American continent. Year on year, European performance improved, showing a positive EBITDA contribution, primarily driven by asset rationalization, as you can see year on year. In the Americas, we saw improved performance due to higher volumes and better shale gas advantage. In Asia, performance increased as we capitalized on margin spread improvement. As you can see, this is the highest quarter in Asia, which is reflective of basically improvement in the spreads in PET integrated as well as the fibres. On a quarter-on-quarter basis, as I was saying, Asia's performance benefited from higher margins driven by improved benchmark spreads for both PET and fibre, signalling early signs of recovery. Industry spreads have sustained in October after continued losses in last four quarters by industry players in China. And you will see some details in the coming slide. Performance in the Americas improved due to strong seeped demand in North America and Brazil, where extended lead times and costly imports due to ongoing disruption created favorable conditions for local production. Indovenia's robust performance especially in South America further supported the strong regional results in the third quarter. EMEA reason faced challenges this quarter primarily due to seasonal slowdown in mobility fibers during the holiday period because in Europe this is holiday period. These pressures were partially offset by higher import parity from Asia driven by the escalated Red Sea situation and by lower fixed costs from asset rationalization. So this gives you region by region. Now I hand over to Muthu to cover on CPET. Thank you.

Thank you, Mr. Agarwal. Good afternoon, everyone. Between my co-leader Kumar Latha and myself, we will cover the slides on combined PET. I am pleased to share today CPET's strong performance for the third quarter of 24, demonstrating the strength of our segment amidst evolving industry dynamics. Through a combination of proactive management and strategic actions, we delivered and adjusted a beta of $286 million for the third quarter, an increase of 23% quarter over quarter, and 27% year over year. Excluding intermediate chemicals, CPET achieved and adjusted a bid of $215 million, reflecting a solid 25% increase quarter over quarter and an impressive 51% increase year over year. This growth was largely driven by improved benchmark spreads in integrated PET and cost efficiencies, including from the strategic asset optimizations. While we experienced a modest volume decline due to reduced PTA sales from these optimizations, demand for our end products remained robust with stable PET volumes. Now, if you're looking at integrated PET, it delivered and adjusted a bit of $178 million, a 42% quarter over quarter increase, supported by stronger benchmark spreads and lower costs. We observed strong demand in North America and Brazil, fueled by extended lead times for overseas supplies, as well as higher tariffs on imports. Our rationalization efforts have enabled us to maintain PET sales volume while achieving a $17 million reduction in fixed costs this quarter. These fixed cost savings are expected to increase further in future quarters following the completion of actions related to the rationalizations. And we have already provided for all major expenses related to rationalization in second quarter of 24 itself. Now, our extensive global footprint and strong local presence provide a very distinct competitive advantage, enabling us to secure premium spreads above industry benchmarks. This advantage supports sustained positive cash flows, whereas many producers in China face cash break-even or even losses due to the persistently low benchmark spreads over the historical levels. Looking at the packaging business, it reported and adjusted a bit of 26 million for that quarter, a 3% decline quarter over quarter, primarily due to short-term lower demand from adverse weather conditions in Thailand and Nigeria. However, recent expansions we will discuss in the coming slides later are expected to continue packaging strong overall growth trajectory. And in specialty chemicals, adjusted EBITDA was lower quarter over quarter, mainly due to the impact of the NDC campaign that was carried out during Q1 and Q2. However, this was partially offset by improved margins in the PIA segment. Now, looking to the industry itself, we would like to share the demand drivers, margin dynamics, and strategic actions that indicate the growth potential. in line with our proactive approach to capture this value. Demand for PET remains robust. As you can see from the chart on the left, in 2024, it is projected to grow steadily at 4.7%, and also expected to remain stable in the coming years in the long term. This year, global pet demand growth is close to 4% for virgin, and about 9% for recycled PET. Together, the growth is 4.7%. Furthermore, IVL benefits from our global presence and expansion in emerging markets like India and Nigeria, where the demand growth is quite strong, around 9% to 10%. Now, key drivers of this growth include population growth, consumer preference for sustainable packaging, unfavorable economic factors such as the recent interest rate cuts in the U.S. and the anticipated further cuts. These are predicted to boost consumption of end products. And with rising global recycling rates, PET's role in the packaging industry is set to strengthen further. In the near term, spreads are stabilizing, supported by industry discipline. Margins have seen consistent recovery through Q3 2024 and we have also seen further improvement in October. While the ongoing Red Sea disruption keeps freight rates elevated, IVL's local presence in Europe and the Americas allows us to capture premiums due to the impact on import pricing. Based on these factors, CPAT management is focused on on sustaining and expanding our market share, maintaining a market premium by leveraging our global footprint, gaining efficiency from asset optimization, and reducing working capital costs to drive long-term value. Now to move to some recent case studies and highlights in overall progress for CPAC. We are looking at this case study on recycling vertical. As you may know, Indorama Ventures has been a pioneer in PET recycling, a vision that has led us to become the global leader in this space, similar to what we are in the Virgin Resin space. We foresaw the value and impact of this business and have strategically invested to make it a core part of our future growth. Today, we have 20 plus facilities across Asia, EMEA and the Americas. Our recent JV with Varun Beverage, PepsiCo's second largest bottling partner globally outside the US, in India is a strong example of how we are positioning for development. We are establishing several greenfield state-of-the-art PET recycling facilities across India. The JV has already begun the construction of two of these recycling facilities, and they are planned for completion in 2025 and early 2026, with potential for more. One of these facilities is located in northern India, in Jammu, while the other is in eastern India, in Odisha. Now, our aim is to reach capacity of 100 plus kilotons. annual capacity of this recycled PET across all the facilities when combined. And India's impressive 90% collection rate and its target of 30% recycled content, the mandate, by 2025, provide very strong momentum for this initiative and for our investments there. By expanding in this strategic market, IVL can leverage its existing ecosystem to drive growth and meet the increasing demand for the recycled content. Now, looking at our packaging business, IndoVida, it is advantageously expanding into high-growth markets, and East Africa is a prime example. Our first converting plant in Tanzania is set to commission in January of 2025, This will complement our existing presence in Nigeria, Ghana, and Egypt, reinforcing our footprint across the continent. Tanzania's large and youthful population, with over 60% under the age of 25, represents a dynamic and growing consumer base and ideal for long-term market growth. Coupled with an annual GDP growth rate of around 6%, Tanzania offers a very favorable economic environment for expanding packaging and consumer goods industries. With substantial capacity, this plant will meet the rising demand for preforms and closures for major beverage companies in Tanzania and nearby countries, including Uganda, Kenya, and Mozambique. Indovida benefits from attractive local fiscal policies, including zero import duties on Dresden. And we are equipped to produce preforms with RPET, aligning with sustainability goals of global brands like Coca-Cola and PepsiCo. We have already secured a multi-year supply contract as well with a major beverage company and similar partnerships are in the pipeline. Now, this expansion positions Indovida as a strong, sustainable partner in Africa's growing packaging market and with more investments being explored in markets like Algeria, Tunisia, and Morocco. With that, I'll hand it over to my co-leader, Kumala Dhah.

Thank you, Motu. Intermediate chemicals reported in adjusted EBITDA of $71 million, reflecting a 15% increase quarter-on-quarter, but a 14% decrease year-on-year. The 14% year-on-year decline in adjusted EBITDA was primarily due to weaker MTBE spreads, as octane values softened from all-time highs. Partially, this was offset by better ethylene crack margins and improved integrated MEG margins and volumes. The 15% quarter-on-quarter adjusted EBITDA increase was driven by the normalization of the gas crackers' volumes. Integrated MEG and PEO benefited from strong crack spreads and improved Asian integrated MEG margins and enhanced shale gas advantage. MTB's year-on-year performance has seen a 48% decline. Third quarter 23 experienced exceptionally strong margins due to a combination of industry supply shortages and healthy demand in Mexico. Throughout 2024, industry margins have reduced due to the entry of new capacity in the market. Last quarter, MTB saw unusually high feedstock costs that have now corrected in this quarter, resulting in 8% adjusted EBITDA improvement quarter on quarter. In Q3 2024, we benefited from strong dynamics in our core markets, with rising industry margins in Asia and a sustained competitive edge in the US due to the shale gas advantage. Our US-based portfolio, using ethane as a feedstock, provides us a cost advantage of about $250 to $300 a ton over NAFTA-based energy production in Asia. Looking ahead, we expect some challenges from Asia's overcapacity, and a reduced shale gas advantage due to higher natural gas prices relative to crude. In response, we're enhancing our ethylene integration through improved gas cracker reliability and maximizing PEO production to capture higher value portfolio. In Q3 2024, we observed a decline in MEG margins as I mentioned earlier, driven by lower crude and gasoline cracks, alongside higher feedstock costs, due to rising natural gas prices. This pressure on margins has been further influenced by the new capacity which entered the market, creating a more competitive landscape. Looking ahead, we expect seasonal demand weakness in Q4 for MTBE, along with higher feedstock costs driven by winter heating demand. In response, we are diversifying our customer base, enhancing our pricing structures, and pursuing competitive feedstock sourcing. Additionally, we're leveraging strategic licensing opportunities to optimize returns and navigate this environment. Before we close, I'm very excited to share one of our Indorama Ventures' most recent groundbreaking sustainability achievements. In collaboration with industry leaders such as Suntory, Ineos, Mitsubishi, Iwatani, And Nestle, just one week ago, we announced the launching of the world's first commercialized PET bottle using bioparasilin derived from used cooking oil. This innovation represents a significant milestone in sustainable packaging by transforming waste into high-quality materials for PET production. Through this collaborative effort, Suntory will introduce approximately 45 million Bio PET bottles in Japan for Suntory's different products, starting this November. This initiative not only reduces CO2 emissions, but also highlights the strength of cross-industry collaboration to address global sustainability challenges by combining our expertise with trusted partners who are paving the way for a more sustainable future, and we are proud to see these efforts take shape on store shelves soon. To close, the CPET segment has shown strong growth amidst evolving industry dynamics. Our proactive management and strategic actions have driven significant improvement in adjusted EBITDA supported by asset rationalizations, cost efficiencies, and favorable benchmark spreads. Thank you for your trust and partnership as we build a future focused on both robust performance and sustainable growth.

Okay, thank you, DK, Mutu, and Kumar. And good afternoon, everyone. Indivinia has delivered a strong financial performance in the third quarter of 24, with significant improvements in key metrics. Our adjusted EBITDA reached $103 million for the quarter, reflecting a 4% increase quarter-on-quarter and a 93% increase year-on-year. This marks continued momentum following the disruptions we experienced in previous periods. Our strategy continues to focus on driving sales growth and expanding our market presence, complete with internal transformation initiatives that are creating significant value for Indovina. This approach supports our vision for more stable and sustainable growth and positions us for long-term success. In Q3, we saw 1% quarter and quarter growth and a 12% year and year growth in total sales revenue, driven primarily by crop solutions. The peak season significantly boosted our volumes, while our market share gains and improved portfolio mix contributed to higher revenues. Additionally, we saw robust recovery in coatings and construction, which further supported our overall growth. Meanwhile, in the APAC region, we're making significant strides in improving our new trading model, which is the outcome of our make-or-buy decision that resulted in the recent shutdown of our botany operations site. Indivinia's portfolio is primarily driven by HVA products, which make up around 80% of our volumes and delivered an EBITDA margin of about 20% in Q3-24. In addition, our Essentials business, which accounts for the remaining 20% of volumes, is closely integrated with the production of these HVAs, creating operational synergies. The Essentials portfolio follows a commodity-like cycle, and at its peak in 2022, achieved an adjusted EBITDA of $81 million. Our customer-centric approach allows us to support just-in-time deliveries, helping our clients maintain lower inventory levels and ultimately driving shared success. Recovery in the essentials portfolio is mainly driven by margin improvements in all your co-products, coatings and LAV. On a sector performance analysis, home and personal care demand continues to be resilient, aided by new product developments and sales recovery in the Argentinian and Mercosur markets. Additional demand was witnessed on account of hurricane build during Q3 in North America. On crop solutions, the strong growth year-on-year and quarter-on-quarter led by higher demand and better portfolio mix, and the good rains led to a strong demand in India. On energy and resources, consistent crude oil price and demands helped kept stable volumes. And the lubricant market is also performing well in North America, Europe and APAC. And lastly, in the coatings and construction in North America, the propylene glycol volumes are improving due to the de-icing season starting in Q3. And in South America, year-on-year growth came from higher market share and margin improvement. For quarter four, it's typically softer due to seasonality, especially with lower demand from the crop solutions and customers reducing inventories due to holidays. Import tariffs came into effect in Brazil on the 15th of October 2024 and should positively impact our business. And lastly, we have some planned outages for the turnaround of maintenance plants in Brazil and North America. Moving to innovation. As mentioned, we're developing a strong focus on innovation in R&D. The drive for sustainable innovation is clear in our industry, and this innovation journey needs to be closely bonded to our customers, creating better solutions that help them achieve their sustainability goals. We see the potential for significant future value creation from sustainability, and we have two goals for 2025. Firstly, the 50% of our new products launched from 25 will be classed as sustainable. And secondly, the 50% of the overall revenue will be from sustainable products. This innovation journey needs to be closely bonded to our customers, creating better solutions that help them achieve their sustainability goals. And therefore, we can see potential from significant future value creation from sustainability in the next few years. Biobased products and free from products of particular interest and we see customers becoming more and more attuned to natural ingredients. Cleaning products need improved efficiency. Coatings are moving to be more water based while maintaining high protection and durability and crop solutions need to be bespoke bio building blocks for insecticides and herbicides with improved application controls of the 33 active ingredients. As we apply this wide range of effects, our core science backbone enables further penetration into newer, highly technical and specialty end markets such as food, pharma and personal care, where our product technology will be very attractive. We're building a best-in-class global innovation team to unlock these chemistries and effects and enable them with digital tools. We're expanding our innovation and marketing and product management capabilities to penetrate these more specialized markets by offering technology, product, and application knowledge to our new customers. I'll hand over now to Diego.

Good afternoon. Good afternoon. The fiber segment reported an adjusted EBITDA of 48 million, which is an increase of 22% quarter over quarter and 44% year on year. The year on year growth was primarily driven by improved industry spreads in the lifestyle segment, higher volumes in mobility and hygiene, and reduced fixed costs across all market segments. The higher volumes in mobility and hygiene reflect management-focused efforts on regaining market share. Quarter-on-quarter adjusted EBITDA grew 22%, supported by higher lifestyle margins and volume, partially offset by seasonality mobility. Management action on fixed costs have started to show results. Fixed costs year-on-year are lower by 5% net of inflation and by 9% quarter-over-quarter. As of now, all fixed cost reduction do not include savings from our planned asset rationalization activities in this segment, which will be implemented in 2025. Lifestyle delivered an adjusted EBITDA of 15 million, a 5X increase quarter over quarter. This impressive growth was primarily driven by fiber industry spreads exceeding $150 per ton, a level not seen in the past two years. Hygiene performed well with an adjusted EBITDA of $12 million, an increase of 4% quarter over quarter, supported by lower raw material prices of polypropylene. Mobility adjusted EBITDA declined by 16% quarter over quarter to $20 million, due to an 11% decrease in volumes from typical seasonal slowdowns during the summer holidays. Despite the softer Q3, the Aronia performance, excluding a 6 million insurance gain from last year, increased by 77%, highlighting underlying good momentum in replacement tires. As communicated in our Q2 results, we are seeing some tailwinds in our lifestyle segments, driven by margin recovery of polyester fibers in China. The Chinese polyester fibers industry is highly consolidated, with the top five players controlling 50% of the country capacity. 54% of the players are not integrated into PX production, and they were not generating positive cash flow. Similar to what you just heard from our CPET colleagues, PX margins have recently been decreasing, and refining margins have also been on the decline. This situation makes it challenging for the integrated player to cross-subsidize their downstream businesses. China's polyester stapled fiber spread peaked in the first half of 2022 and thereby had been on a falling trend until the end of the first half of 2024. These spreads were unsustainable for the majority of producers, even in China. The spreads are now hovering around $180 per ton. This is still lower than our historical average, but the bare minimum required for the industry to sustain. Our assets in Indonesia and India are currently running at full capacity, and we have been able to increase our domestic share. We are maintaining our price premium in key domestic markets through customer intimacy and support of anti-dumping initiatives. The announced footprint rationalization in Europe will reduce fixed costs and support our remaining European specialty business, whereas the more standardized products are being served from our Asian assets. Please allow me to share a case study. Our management action aimed to optimize our manufacturing footprint by improving utilization rates and reducing fixed costs. With the struggling European economy and the high cost structure, we decided already in 2023 that we will look into our option to optimize the manufacturing footprint. As one of the actions, we did a deep dive into our European lifestyle business. The outcome of the study was a plan to centralize the yarn spinning and twisting activities that are currently done at two entities, in Italy and in Germany, in one location, Italy. As an outcome of decentralization, we will reduce our headcount in Germany by 210 employees, leading to an annual saving of $13 million. After the final decision was taken early September, the restructuring was communicated on September 26. Finalization of this transfer is expected for mid-2025. This move will improve the profitability of our European lifestyle business and will allow us to continue serving as a local supplier with Asian backbone in the European market. It goes without saying that we will continue and even enforce the transfer of standardized products to our Asian supply base, leaving only limited specialty offerings with attractive margins in Europe. In 2023, we started to change the fiber organization by eliminating the three business unit structure and moving to a centralized, segment-led model. We're now moving to the second phase of this change by implementing our new organizational blueprint. We will increase speed and efficiency in the decision-making process by eliminating the current entity-based structure, which is a legacy of our acquisition history, and replacing it by a standardized functional structure by region. In other words, decisions related to all functions are taken centrally and will be executed in a standardized way in each region. We will take out a significant amount of costs, around $22 million annually, by reducing layers and increasing span of control. At the same time, we will fully leverage our global capability center, which is already in place in India, by moving tasks from our higher labor cost areas into the global center, and therefore benefiting from the arbitrage possibility for manpower costs and standardization of workflow. Lastly, we are driving synergies with the corporate and CPAT organization through well-defined roles and responsibility and a constant evaluation of saving potential to be achieved. It is expected that this organization change will be implemented in early 2025. This change is a part of a larger fixed cost reduction plan, which will eliminate a total of $74 million of fixed costs in the fiber segment by the end of 2025.

Thank you, Diago and Alistair. Let's see how our debt has evolved over the past nine months. So as you can see in the slide, in nine months of 24, we generated an operating cash flow of $912 million, out of which $203 million was used for maintenance capex and $329 million for net financing cost, including perpetual interest. This resulted in a free cash flow for IVL shareholders of $380 million, which reduced the net debt from $6.84 to $6.46 billion, as you see in the slide. After paying the dividend to the shareholders, allocating some funds for the growth capex, which were basically mainly in the recycling business, as well as our Moxville fiber expansion and one piece one in the Mexico, which will have improved earning coming in the coming year. The net debt after dividend and capex as you can see stands at 6.68 billion. This shows our commitment to generate free cash flows and reduce net debt. We made one time deferred payment of 150 million dollars related to 2022 Occitano acquisition and issued a Thai baht 15 billion perpetual debenture which is used for repayment of another perpetual debenture which is due in fourth quarter and that's why we are added back here and has been shown separately. Net debt after Occitano payment and perpetual stands at $6.37 billion on a constant exchange rate of December 23. So this is based on constant exchange rate of December 23. In the past nine months, we were affected by non-exchange rate movement, cash exchange rate movement on Thai Baht, denominated debt. As you know, Thai Baht appreciating by 6% in nine months. And now again, Thai Baht has depreciated as we speak. And this affected reported the net debt. However, for better understanding, we have shown above after removing such exchange impact. If we look at in Thai bar translation, net debt has actually reduced from Thai bar 248 billion in second quarter 24 to 216 billion in third quarter 24. After removing cash requirements for perpetual redemption in November, it reduces to 231. So we add back 15 million, which is being paid in the fourth quarter. The non-cash exchange rate movement also impacted our equity because we have investment in dollar and BRL, where Thai baht strengthened against dollar, as previously mentioned, and Thai baht strengthened against Brazilian real by 11%. We have a big investment in Brazil, as you know, and strengthened by 11% in third quarter 24 and 16% over 9-1-24, impacting our equity by $243 million in 9 months 24. This impact is temporary and has started to reverse in the fourth quarter. Actually, all the currencies have started weakening. You see the U.S. index, the currency index has become 105 from 100. So it's already gone back to the original exchange rate. Management is committed towards free cash flow generation with our asset rationalization program is a big lever to enhance the free cash flow. This free cash flow is going to expand over the next three quarters and continuing through 2026 as outlined during our capital market day. As company performance strengthens and the completion of the planned IPOs and divestiture which I covered, we expect further net debt reduction in line with our strategic targets. So this shows you the debt movement. On refinancing, we have successfully completed $1.3 billion of refinancing, as you see on the list on the screen, for debt maturing from 2024 through first half 2025. We now only have left repayment of $0.3 billion for this year and $7.7 billion for 2025. We have received number of term sheets offering from both international and Thai banks, each offering up to $1.5 billion in long-term loans for Indovenia, This will help to refinance our second half 25 and 26 repayments and create more liquidity at a lower spread. We are proactively taking actions to maintain high liquidity and optimize our costs. This debt restructuring, as you know, is also in preparation of the upcoming IPO of Indovenia to put this debt on Indovenia. Following our Thaibat 15 billion perpetual debenture issuance in July, We upheld our commitment redeeming the previous Thai Bar 15 million debenture at its 5-year first call option on 8th November 2024, which has been repaid. Our priority to maintain robust liquidity remains unchanged. As of third quarter 2024, liquidity remains strong at $2.5 million. Through our proactive debt management, we have reduced the current debt portion, creating greater flexibility and headroom in the liquidity position. Now looking at the balance sheet, at the end of third quarter 24, our adjusted net debt equity ratio is at 1.33 times and DSCR of 1.27 times reflect proactive action and financial discipline. Adjusted net debt equity was calculated by excluding non-operating debt, the impact of non-cash exchange rate movement in debt and equity because it is impacted on quarter end and considering impact of cash flow for payment of perpetual debentures in November 24 to reflect the correct ratio by removing non-cash accounting related items. Of our total debt, as you can see, 47% is floating and 53% is fixed, enabling us to look at various opportunities to reduce our finance costs going forward where interest rates have peaked in all major markets like in US and Europe. We are strategically positioned to benefit from the global trend of falling benchmark interest rate. As this rate reduction takes effect, we anticipate a decline in interest costs as we move into the next year with lower utilization and also lower debt. To manage currency exposure, we continue to apply a natural forex hedge strategy. This approach leverages our global manufacturing footprint by aligning debt and net assets within the same currencies, effectively mitigating foreign risk across diverse regions and market environments on a long-term basis. As you know, our ESG link financing is 32% of the total debt, reflecting our continued commitment to responsible financing aligned with our long-term ESG objectives in both operation capital strategy. In Looking at the working capital now, in third quarter 24, our working capital days is 87 days, down from 92 days in fourth quarter 23. We remain fully committed to our strategy of optimizing working capital management and enhancing cash flow performance. We are on track to achieve our CMT targets of reducing working capital to nearly 84 days by 2026. However, our net working capital, as you saw, went up in third quarter, 24, versus last quarter due to higher inventories, particularly transit, raw material inventories in CPAT and in Dovenia. Our CapEx strategy reflects a disciplined approach, as you can see, with around $300 million of CapEx for 24 to 26 reduction. You can see here that we have reduced our CapEx commitment by $300 million from the previous levels announced on CMD. For 2024, we have reduced CAPEX to $530 million, balancing growth and maintenance from $660 million. Of this, $220 million is allocated to growth initiatives, mainly focused on sustainability, circularity, and as I mentioned about the fiber projects, which are completing in this year. And $310 million is directed towards essential maintenance to ensure operational reliability. This leaner CapEx plan enhances our financial flexibility, enabling us to prioritize high-value growth projects and strategic initiatives that drive long-term sustainable growth. You are seeing that in 2025, we have increased in the maintenance CapEx because of the major turnarounds. One was POMTB. This is $100 million, once in five years, and also the Cracker in Lake Charles and Clear Lake Glacol plant. That's why you see a spike coming into 2025. We remain fully committed on deliberating and capital allocation with a very strict discipline. So, let us now review what is the outlook. As we see, the worst is behind us. We expect strong volume across all segments, reflecting resilient end product demand and solid market fundamentals that will support overall performance. For CPAT, as you know, fourth quarter is normally lower seasonality. However, we expect to benefit from ongoing savings through asset rationalization, that is the fixed cost saving. Additionally, as you saw, continued favorable benchmark spreads observed in October 24 bring positive signs to further support the performance of the segment. You saw the PET margins integrated improving. Intermediate chemicals will be marginally softer from declining MTVV spreads due to higher feedstock cost. However, as the crack margins are lower, the MEG will be better. Indovenia may see lower performance as demand tapers off due to lower crop session in fourth quarter 24. The fiber segment is expected to benefit from management actions and improve benchmark spreads in lifestyle. As you saw, that lifestyle is polyester stable fiber margins have improved. The expansion of hygiene and mobility project in America's position as well for sustained growth and enhanced performance in this segment going forward. So we'll see this earning from this expansion coming in 2025. So if we sum up looking ahead to 2025, what do we see? We anticipate stronger performance driven by higher volumes. You can see lower fixed costs from all the rationalizations which we have done, which is $170 to $180 million. Better sales mix and higher benchmark spreads as you saw the improvement. Lastly, I am pleased to update you that the execution of our IVL 2.0 strategy is progressing as planned. Our rationalization program is on course to deliver an annual EBITDA upliftment of $150 million by 2025, contributing to increased free cash flow while simultaneously reducing net debt. This progress reinforces our commitment to achieve a net debt to EBITDA ratio of less than 3 by 2026, strengthening our ability to navigate market challenges, positioning us for future growth, and creating long-term value for our stakeholders. So, in the past decade, as you know, this is just to remind you of IVL 1.0 and 2.0, we achieved rapid growth by scaling up. expanding globally and building operational synergy through strategic acquisition and vertical integration. This growth, as you know, supported by low debt, low interest rate financing, has established us a leading sustainable chemical company with a robust integrated portfolio, providing cost advantages and resilience. As we rolled out in Capital Market Day, in IVL 2.0, we are shifting focus to create capital, greater stakeholder value, drive cash flow and reduce leverage. What are the key priorities? Transitioning to organic growth fueled by free cash flow rather than debt. Increasing customer value through innovative, high-value, and sustainable products, as you heard from all the presenters. Enhancing cost efficiencies to maintain a competitive edge, getting into the first trial cost structure. Strengthening our operational model with advanced data and analytic tools to increase agility and maximize group synergy. Now, prioritizing free cash flow, earning per share, return on capital, and moving beyond EBITDA growth for more direct shareholderism. And the biggest change which becomes is that committing to a prudent balance sheet strategy targeting debt to EBITDA ratio below 3 even in down cycle. So IVL 2.0 makes a strategic evaluation aligned with vision 2030 ensuring our resilience and long term success in a shifting environment while reinforcing our leadership in the chemical industry. So thank you very much for patient hearing. Now we can take your questions. Thank you very much.

Thank you. Audience, if you have any question, you can raise your hand and then I will pick. So I can see that two hands which are raised. So one is from Khun Napat from CLSA. Can you please unmute and ask your question, Khun Napat?

Hi, thank you, Khun Vikash. Thank you, Khun DK and management team. I have three questions. Let me first start with the First question is on the – I may refer to the slide on page four and also page six. I think we mentioned about the asset rationalization that due to 19 million U.S. in the fixed cost savings. My question is the 19 million, you know, would be equivalent to about 600, 700 million baht. And we are having a net profit of 1.5 billion baht. So the 700 million baht, assuming that we don't have the cost savings, does this mean that the net profit would come down about 700 million baht? Yeah, this is my first question. It's also related to page six. Because in the page six, you show the operating rate, you know, improving operating rate to 82%. from the destocking and also the cost saving of about 160 to 170 million U.S. for the whole year 2025. And now we are achieving 19 million in the third quarter. So if I were to assume, you know, 20 million U.S. in Q4, so does it mean that we achieve about 40 million U.S. this year and then we are targeting about 160 million U.S. in 2025? Yeah, this is my first question.

Kunapat, do you have three questions or you want us to address this?

Okay, second question is on the because I remember in the last presentation we were mentioning about divesting non-core asset and the fiber if I remember correctly is a fiber asset and on page 7 on page 7 we were talking about the Project Luster and Project Copra And I think that this is related to the fiber, to non-core fiber asset that we, if I understand correctly, they are the same thing that we were planning. And also on the slide 23, sorry that I have to refer to the slide because it's related to the fiber business. We are talking about relocating assets from Germany to Italy. And is this one of the assets that we are divesting, I mean, the Germany that we are divesting? And this is also, is it also part of the cost saving that we were talking about, the 150 million U.S. EBITDA in 2025? My third question is on the recycling business. I'm not so familiar with the recycling. I know only that we are on page 12, on page 12, because I know that we have about 600, 700K out of 750K aspiration of the recycling capacity that we want to achieve. And now we are talking about the two plants, recycling plants in India. Then I see the map, the map and also the bottling capacity in each area. And now we are adding 32 K ton recycling in one, in each location. So I wonder how, because we, Hold on. We expect totaling 100K tons recycling capacity in India. So my question is, the 32K each site, meaning that we have 64K, and out of 100K tons, is this correct? So meaning that we are going to have more capacity in India coming up? So relating to India also in the Tanzania, sorry because it's all related, I just want to make sure I understand correctly. Because in the Tanzania, you also have a packaging. I question whether it's a packaging or it's a PET packaging. capacity in Tanzania. Because I know that under the CPET, you have an intermediate, you have packaging, you also have a CPET. So I wonder which one is Tanzania. Yeah, that's all my question. Thank you.

Thank you, Khun Napat. So let me address some of the questions and then some questions will be taken by the fiber, Diago and recycling. I'll ask Mutu to take it. First, you're right, $19 million is a fixed cost reduction, so multiplied by 32 is 600 million baht. Of course, you know, we shut down the Rotterdam assets on 30th June. We shut down the Canada assets, so still there is a hangover into it. Fourth quarter, we'll have another saving. Vikas, if I remind me, it's about 28 million, right? Yeah, 28 to 30 million in fourth quarter. And then you will see, because this becomes annualized 112 for fourth quarter, but we are targeting a total fixed cost reduction of 160 to 170. Now, let me remind you here, the major fixed cost comes from Rotterdam, which is a big high cost. Then we have Portugal, then we have Canada and then Australia, where we shut down. Your other question was on the, so that's where it will get reflected in 25. As you know, people severance packages and all that are getting paid, all the fixed overheads are coming down. So this will get translated into the future earning of 25. Your other questions in that was operating rate went up from 78 to 82%. Yes, this is because we have taken the substantial capacity out in third quarter 24 as Rotterdam is shut down, Canada is shut down, Indo-Venia is shut down, but you will see progressively this going up. Divestment, you asked about, actually this is about our fiber business, but it is more on the wool side, which is the divestment, which is a very profit-making company. We don't see this as a core business for a polyester, and that's what we are looking at it. And another, Cobra is some of our chemical business, which we are looking, which is not directly, you know, related to Indovenia. So we are working about that. That's also a profitable business. So these divestments, which we are working, are targeted in 2025. Now, I will ask, and packaging in Tanjania, just to page you, this is a packaging preformed business, no PAT in Tanjania. As you saw, packaging, we are operating in many countries where we are giving solutions to our customers for packaging. You can see the growth in different markets. We don't go in Europe and America because we don't want to compete with our customers. So this is purely packaging. This is the growth story for our packaging business. I'll ask Diago to take on slide 23, if you can explain about Italy and Mutu on the recycling business. Thank you.

Before we move on, can I just want to confirm the asset divestment that we are expecting about 300 million U.S.? ? Are we expecting any gain or loss from selling these assets?

There will be a gain on these assets. Depending on the realization, we will let you know. And as I mentioned, there's another gain which will come from the sale of land of, as I covered in my presentation, from the land values of the shutdown assets in Rotterdam, in Canada and in Australia. and that can be around $120 million to $150 million. So all these gains will be accounted at the time of the disposal.

Okay. So, Dike, you partially answered already, but basically this operation that we have rationalized in Germany is part of our lifestyle business. We had two factories that could make the same products. And both factories were not fully utilized, so we're shutting down the German filament assets, and we're moving the capacity, we're moving the production basically to the Italian assets so that we fill up the Italian assets without having to add a lot of people. So that generates $13 million. This activity is part of a fixed cost reduction plan. It's not Project Luster or COBRA, as DK has already mentioned, but this is part of a fixed cost reduction plan, which will take out $74 million between 2024 and 2025, $20 million in 2024, and the remainder in 2025. We will have, in addition to that, we will have, as we have mentioned at the CMD, we will have some asset closure, which still have to happen. They are all active. We will realize them in 2025. So that's kind of to put all the pieces together. Thank you.

Yeah. So on the recycling, you're right. We have shown only two facilities on this chart, which are totaling 64. But as I mentioned during the when we are going to the recycling slide, we are looking at more facilities in addition to these two. So combining all of that, then we expect the capacity to be 100 kT plus per annum. And the other three facilities that you see, Karnal, Nagpur, and Haldia, they are virgin resin facilities. They are not recycling. We just wanted to show it on the map just for geographical reference. So India, we talked about this mandate, 30% RPET content. That is starting in April of 2025. But it is quickly increasing the mandate to up to 60% by 2030. So considering the growth, per capita growth in India, certainly there will be several more output facilities required. I hope that answers your question.

Thank you, Muthu. I think if you see the Indian market, about $1.9 billion tons. If you talk of 30%, we are talking of 570 KT. So recycled PET demand is very rapidly growing in India. And this joint venture is 50-50 with Varun Beverages, which is a listed entity in India. Thank you.

Next question. Thank you. I can see the next is Pat. So Pat, can you hear us and can you unmute and ask your question?

Okay. Yes, I can hear you all well. Am I audible to start off with?

Yeah, please go ahead.

Perfect. Thank you. Thank you, DK and the team for a wonderful presentation. My questions are pertinent. My questions are pertaining to the CPEC segments. This is for DK and for Kumar and Mukul, if they have any thoughts to share. So, DK, you mentioned in your opening remarks regarding the contract negotiations with the customers and what you did of these ocean freight volatilities. And now you have the Trump administration coming in. I'm very curious to know, because I think bulk of the contract renegotiations happened in November, December for North American clients. And they are like one to three year contracts. Now, in light of everything you're seeing on the ocean freight and Trump administration, what type of a tailwind you're seeing on the realizations? Like what sort of a baseline increase you're seeing? When you talk to the customers and what are the percentages, I'm presuming you have the moral average right now as compared to the customers. I'm just trying to understand how much of an EBITDA uplift that would entail for the company, especially in the CPAT segment over the next couple of years in the medium term. That's my first question. And secondly, I just wanted to clarify, you mentioned about the freight rates improving from the October lows. How do they compare right now in contrast with the third year? third quarter because that was pretty elevated and we have seen healthy payments for the sector. So that's my second question. And PED pricing so far in fourth quarter, is it as strong as third quarter or we are seeing some bit of it coming off? Those three questions from my end. Thank you.

Yeah, I think just on freight, you're right. The freight rates have started increasing. Naturally, there are a lot of markets where we have import parity, which will certainly benefit. It's not only PET, but also fiber. Like in India, the products are priced. Brazil, the products are priced based on that. So I'll ask Muthu to address on the contracts, how we are negotiating and what is the situation.

Thank you for your questions. As far as the contract negotiations are concerned, we are still in the early stages of negotiation. But so far what we have seen is the current environment, which is basically elevated freight rates, but also as we saw on the China, what you see here, the consistently improving benchmark spreads in Asia. You see that from July, August, September, integrated spread is 154. And then October, this has further increased to $160. So this, along with the elevated freight rates, they are certainly helping us to improve our contracted spreads for the coming year. But as I said that we are still in the early phase. We have several more contracts to be negotiated. But in general, we see a positive trend influenced by these. That is on the contracts. And as far as the freight rates are concerned, to your question, yes, the peak was, let's say if you talk about the Shanghai Container Index, it was about $3,800, $3,900. That was the peak in July. Since then, it dropped significantly. to about $2,000 in October, mid-October. But since then, it has increased. And as we said earlier, now it is about 15% increase. So it's about $2,300 to $2,350. And we do expect further increase. So just to give you a little bit more color on that, what had happened was during July, why there was such a sudden drop, Because one of the big factors was also that, if you recall, there were projected to be strikes, port strikes in multiple U.S. ports. And also there were chances of the Biden administration, they were talking about new duties being imposed on several products for China starting September. So all this led to, let us say, some expedited shipments before these came into effect or to avoid any impact. So that led to a large increase, but also a drop because the demand was less quickly after that. So that dropped. Now that is getting normalized. And now the freight rates are increasing again. One more sort of dynamic that is happening now post the elections in U.S. and the administration change and the talk about potential new tariffs in 2025. There is a possibility that we see the same phenomenon, which is to avoid that if there is going to be increased shipments during Q4, which can once again lead to rise in freight rates. And some of the data point from the industry, you might have noticed that Maersk, when they announced their third quarter, for the fourth time, they increased their earnings guidance this year, continuous increase in their guidance. And also the total container demand growth for 2024 from the earlier projection of four average of about four to five percent. Now it has been updated to six percent plus. So all these factors are pointing that there is likely to be some recovery in freight rates, which should further help our contract negotiations. And Q4, you are talking about, as you said, that the freight rates we expect to be at elevated levels and potentially some more increase. And the spread that China benchmark spread, we are seeing this continuous increase. And we will see how this plays out in the rest of the quarter. And as far as demand is concerned, we expect it to be stable. Of course, there will be some adjustment based on the seasonality. But other than that, we expect the demand to follow a stable pattern. Hope that answers all your questions. Thank you. Thank you so much.

Can you bring that integrated slide? I think Diago covered this, what is happening in the industry. That PET, you can see this slide shows you the PET spreads, PET spreads and perazoline spreads. So what is exactly happening that as the perazoline margins have collapsed and Diago covered in his script, you can see this is for return of PET. The perazoline spreads coming down because refining margins have come down, as you know. Industry is highly consolidated, both for fiber and PET. You see this picking up of the PET margin. Historically, you have seen like in 2021, 22, of course, everything was big. So today, the value chain margin is highly consolidated. And certainly our feedstock prices have come down. This should help. As Muthu said that we are seeing this maintaining of the margin and also you saw Diago telling the same thing. So hopefully this helps you how the market is shaping up.

Thank you, Rekha.

So thank you, Pat. And I can see Mayank from Morgan Stanley, you have a question. So can you please unmute, ask your question?

Sure, thanks, Akash. So firstly, thank you for this presentation. And I just had a couple of follow-ups on the earlier question around US contracts. If you look at PET spreads for 24 versus 23, we are still down by at least 15, $20 in Asia. So when you are renegotiating contracts, what are the kind of conversations you're actually have happening apart from the freight rates? Because normally those are pass-throughs. So what are the kind of contracts you're kind of seeing and what percentage of your volumes right now are going to get renegotiated for 2025 in North America?

Motu, you want to answer that?

Yeah, so hi, Mayank. Hope you're doing well. Thanks for the question. We are about, let's say, roughly two-thirds of the contracts getting renegotiated. Some of them have already been completed and some more are still in progress. Whatever contracts are being renegotiated from 2024 to 2025, we are seeing an improvement in spreads as compared to what we had in 2024. Of course, there are different reasons like the benchmark spreads, the freight rates, as well as what we have seen is the increasing level of uncertainty on overseas supplies that we also mentioned, referred to in the earlier slides. So all these are with our large domestic presence and us being able to offer a basket of solutions to our customers, and that is helping us to improve the spreads for the new contracts.

Mike, to add further, a million ton of PET is imported in the United States from different countries. One of the new administration's drive is that they will increase also non-China. And this may be, I mean, this is new development, as you can see, once the tariff gets implemented. So certainly we see that people will go back to the domestic supplier as much as possible with improved higher freights, potential threat of duties from other countries. So it will be an interesting time to look into how this context negotiation shapes up.

And in Mexico, Mayank, if you remember that some of these increased tariff measures have already been implemented as well. And in U.S., let's see what happens with these proposed tariffs from Trump.

I can move to that point. I think in Mexico, have you seen any increase in prices recently after the measures?

Yes.

Yes.

Right.

It's been a complete pass through of the 10 to 10 percent or is it like half of it?

So it is. Yeah, it is gradual. There are still you know, it is not that the imports are totally shut off. Right. So basically, it is just to ensure that whatever trade is happening, it is done in a fair manner. So we are taking that into account, the impacted origins, as well as the other origins, which are still having preferred duty rates. But certainly there is an improvement. The other factor also in Brazil, if you remember, there the duty went from 12.6% to 20%, and Alistair also mentioned about that, that came into effect 15th of October. And that is a full pass-through. with a small lag, but otherwise that will get fully paused through in the price. So overall, yes, any change in tariff rates do influence domestic spreads.

Got it. And I think just focusing on your business in China, where obviously it has been a bit of a challenge. Can you just talk about how the dynamics are kind of going through on the China side of the portfolio? So things got better, got worse, or if you are seeing any improvement on utilization rates, anything around that?

So China, we have one, two major assets. Of course, we have some small assets. We don't have a big exposure. We have half a million ton PET capacity. The operating rate of the Chinese assets, if I'm not wrong, is about 90%. Of course, the profitability of the Chinese P&T is compressed, but we have a state-of-art tire cord production and it's one of the best performing assets. So, Diego, you want to add on the Chinese tire cord assets?

Yeah, so tire cord assets have been sold out for us. So China's been going very strong in both replacement tires and also EM tires. And we see now demand normalizing in Q4 in China. But let's say this has been our flagship sites for the mobility segments being fully loaded. So we are able to compete there. We are cost competitive, and we play there both domestically and also export. So good dynamics, good momentum in China in mobility. Thank you.

Thank you for that. And the second question was more dedicated to you on the balance sheet side. You talked about free cash flow generation. Can you just talk to us about how much will be your repayment of debt each year, 24, 25, 26 now? Ex of the organic side, I'm talking about inorganic side, I understand, but organic side, at least if you can just talk us over that.

Yeah. So if you see the remaining of the year is only 300 million. Then in 25, you have 600 million long term loan and 100 million debentures. Of course, this will get refinanced debentures. I talked to you about one and a half billion dollar. which we are refinancing for Indovenia, and that funds will be utilized to pay off some of the loans of 25 and 26. We are preparing for the IPO for Indovenia, so put that debt on that balance sheet, and those funds will be utilized to pay this. So we have a very comfortable liquidity position.

Okay, and on a net debt basis, does this absolute net debt go down from the $6.8 odd billion number to what would be their target number in a couple of years' time?

I think we are talking of nearly $4.3 billion. We are talking of $1.3 billion coming from divestments and IPO, the free cash flow, as you saw earlier. So we are talking of unwinding the debt by $2.5 billion. And as you saw in the Capital Market Day presentation, I don't know – Can you bring that slide up, Vikas? So that is what is the target, that if we, as we rolled out our 200 capital market day, we're targeting $2.1 billion, so debt over EBITDA will be significantly lower than 3.

Got it. So about $1.2 odd billion would be organic and the remaining would be inorganic in term.

Correct.

Correct. And I think the last thing on the cost of debt, what would be if you can give us a bit of a guide for cost of debt for 2025? I know interest rates have been wallet and half is floating. But what would be the rough guide if you can give us as of today?

So we have reached if you can go to the slide that we have reached 5 percent as interest cost, which is 24 basis points. As you said, we have fixed and floating 53 and 47 percent. Thaibath has recently cut and we see that Fed cutting 25 basis points. If you see that this average cost comes down by, say, and this is very difficult right now to determine. Earlier we were thinking four cuts, at least 1%. But overall, if 0.75% comes down, we are talking of nearly $30 to $40 million of losses. savings in the interest cost and also from the working capital release because of the shutdown assets. So, we think the interest cost will come down. I think the peak is behind us. Got it. Thank you. Thank you.

Thank you, Manik. Audience, if you have any question, I can see that there's one more hand raised. Okay. Yeah, Sumit, can you please go ahead and ask a question?

Yeah, thank you so much for the presentation. This is Sumit from JP Morgan. Just a couple of questions from my side. I believe that the PX costs are going down as well as there is room for US ethane practice to come up as well, considering the Trump administration mandate. But I want to understand better To what extent are these feedstock costs passed through? I believe some of the contract structures as well as the industry demand supply situation requires you to pass on some of these savings. So we just want to understand better the economics of the cost savings, that's one. And my second question is, is there any scenario you see where markets are improved to such an extent that you may not require to, you know, do the IPOs or divestments.

Thank you. So, thank you, Kunsuman. I think if I correctly understood, you were talking about the PX costs going down and the ethane coming down. I think you're right. What has been happening in the perazal in margin that in when the refinery margins were high, refineries were running to put more into gasoline. As the gasoline spreads came down, more extraction of aromatics has started. And you can see a very correlation shift within the refining margins in this. You can see that PX spreads have come down. So basically our feedstock Prices have come down, which is easing out the spreads and downstream, which is PET and fibers. And that's where we were showing that if you see first quarter, second quarter, third quarter, they were very compressed. This was coupled with extra capacity of PET coming in China. And you saw worst in $69 first quarter, second quarter $65. And now gradually improving. So certainly that is benefiting. The view on the refining is certainly because of the additional capacities coming in the world. The refining margins will remain under pressure in the short term, which just means Paris Island will remain lower as per present because there is such utilization rate. And China is particularly low and outside China also. On the ethane cost is directly linked to the gas price. If you can show the frack margins, we see that You know, the MEG prices is dictated by NAFTA based. So you can see this shows Asia integrated MEG margins. You know that all the olefin NAFTA players have big challenges, whether it is polyethylene, polypropylene or MEG. And this shows that non-integrated MEG margins has been very bad, causing significant losses for NAFTA based, which determines the last marginal cost. And the advantage of Shell gas remains robust. The gas availability, of course, in winter, the gas might go up a little bit because of the demand. But outlook for the gas remains around $2.5 to $3 a million BDU. There's a lot of ethane capacity in the United States. So ethane cost will remain low. And As this graph also shows you the cost curve of MEG, the lowest is ethane based, as you can see there. And then you have Chinese coal based and then you have the gas based LPG based. Actually, propane has also gone up. So LPG cost has also gone up and NAFTA. So 45 percent of MEG capacity is determined. And this holds typically good for all the olefin business. So ethane will remain linked to the gas prices. Gas will continue to remain cheaper in the United States. And with new administration policy that we want to make more oil, this means more associated gas will come. So we have to see how this shapes up going forward. Hopefully that answered. The last question was on IPO. Yeah, no, but.

Sorry, just before we go, my question is more around how much of these lower feedstock levels are passed through. I mean, how many percentage of, say, your portfolio seeds are passed through and how much of the portfolio where you actually benefit from these lower feedstock?

Okay. So in PET, five and a half million tons. I think if you see US and partly in Mexico, they're linked to Verasalian. So that will be, I would say, roughly very small percentage. Overall will be 15% to 17% of the portfolio. Otherwise, rest all gets reflected. And as Motu was addressing, since our Asian spreads, PET spreads moves up, what happens that an import parity goes up. So even if you have Parazalin goes, pass through, on those contracts also you have improving margin trend, as he was explaining on the new contract. So I hope that helped you to understand. Ethane, there is nothing linked. There is no contracts linked to ethane. They are only linked contract with the NTP of Ethylene, which is a negotiated price settled in US. And that you saw the crack spreads going up in third quarter. So there is nothing linked with ethane. Yeah.

I understand. So on sorry, on PX side, you said 15 to 17 percent has a pass through. Is that right? Yes.

This is a rough number because this is like U.S. contracts which are linked and some of the European contracts. But rest of this all through basically you get whatever improved Paris Island margins or lower Paris Island prices you get. pass through. While under the negotiated contracts like Europe, most of the contracts are Asia, your feedstock goes down, you get the benefit. Similarly, in Brazil, for example, it's purely linked to the Asian market import paradigm.

Understood. Very clear. Thank you.

You also talked about there is a scenario which can emerge where the IPOs may not happen. I don't see that happening because EndoVenia, as you can see, is one of the largest surfactant, non-ionic surfactant producer. We have a leading position in Americas. We have seen a lot of interest. We have companies which are the peers and the market is improving. I'm sure there will be a window to go for EndoVenia. EndoVenia has a very historical history. track record of strong EBITDA margins. So we are confident that these IPOs will be successful and will happen. And we will continue to remain committed on our deleveraging strategy.

Thank you.

Thank you, Sumit. That's from JP Morgan. I can see we have Eliza from Fidelity Singapore. Eliza, can you hear us? Can you ask a question?

Hi, thanks for taking my question. Can you hear me?

Yeah, we can hear you. Just go ahead.

Okay, thank you. I just have a follow-up question from Mayang on the US PET. So I understand that this year two-thirds of contracts will be up for renegotiation, and that renegotiated rate will be better than what has been already negotiated, which is the one-third. But then I just want to understand whether US pet net income for 2025 should be lower year-on-year next year, given that You know, it should be replacing what is in the current book, which is a contract that was signed in 2021 and 2022.

Motu, you want to take up that?

Yeah, so it's too early to say on that. Like we said that we are still in the early stages. And some of these contracts that are not getting renegotiated, which are multi-year agreements, some of them are also at higher spreads. depending on when these contracts were made. And the new contracts, like we said, that overall we see an improvement in spreads. Overall, what will be the weighted average effect that we will have to wait and see? It's a little too premature to comment on that. But we do see a positive trend, as I explained earlier.

Yeah, I think we do a positive trend. I think to see as Americas is a significant portion of our EBITDA. We see a positive trend overall, Americas, including Brazil, because there is a positive impact, and Mexico, as you saw. So I think we are in process of negotiation. So we'll see. We'll guide you in the first quarter. Okay, got it.

Thank you very much.

Thanks.

Thank you. And just to add this year, there has been some updates like Mexico, the duty has changed. So Brazil, the duty has increased. So all of that might help also. So I can see one more hand raised from Comson from Bank of America. Can you please ask a question, Comson?

Thank you, DK. And I have a follow-up question on PX. PX spread is now pretty compressed, perhaps because of the slow demand from petroleum side. Are you still seeing or expecting the PX is going to be long for next year, even if there is a limited demand increase? We're still foreseeing gasoline vending demand, which is going to be slow and going to next year. And on the U.S. Shell benefit, when did that translate into MET margin? It doesn't seem to be very strong. Is that because of the MET is still very long? So the benefit of Shell has been offset by MET dynamics?

Thanks. Thank you, Kulkomsan. I think let's bring that slide. What is important to understand that every refinery, most of the refineries in the world will have integrated perazolin. And we can see a large refinery in India. When the gasoline margins were very strong, they stopped producing perazolin. There are several units. They turned down the perazolin. They started importing. And that's why you see a peak as the refinery margins, gasoline demand was stronger. The refining margins were very strong. If you see GRM, you have that slide, GRM, gross refining margins in Singapore, which has come down at the peak of $10.7, which is a benchmark. We're talking of $3.6. I think this is 2019 level and 2020, let's not consider because that was a very period of disruption because of COVID. So we certainly see the refined margins under pressure. This means more perazolin will get produced. The demand for perazolin is dictated by PTA, which is basically polyester. In China, the polyester demand is Wasn't that great this year, but we think that this will come up because polyester is the cheapest fiber and the PET growth has Muthu was connecting. So we see it is difficult to say, but yes, perazoline margins will remain depressed. But the present levels are very low and there is normally a lag by the time the perazoline margins comes down and people rationalize and then perazoline bounces back. So it's a combination of perazoline and benzene. So their aromatics are really under pressure. which benefits our downstream business because naturally our feedstock prices are coming down. If you come to the U.S. shale gas benefit, if you go to the MEG, Actually, the MEG performance has improved as compared to last year because the US MEG, you know, if you see this slide, you're absolutely right. 2018 was the peak of the MEG margin. You see the MEG compressed, the dark blue, which is for a typical NAFTA-based MEG producer. Many people have shut down the plants, particularly in Taiwan. And you see the advantage, US shale gas advantage. It is actually enhanced in last year and MEG prices have remained unstable. Even Saudi Arabia, as you can see that Saudi Arabia is now going on rather mixed feed because as oil production comes down, the associated gas comes down. So as a result of this, actually our financial results of intermediate chemicals, can you go to the financial results of intermediate chemicals? You see an improvement on quarter-on-quarter. You can see in $31 million, we lost in third quarter 23, and third quarter 24, 12 million we made. Having said that, this is combination of both crack margins, cracker reliability and MEG and MTB is 59. Certainly, you can see that MTB was peak in third quarter because gasoline was very strong and our feedstock prices were lower. Now, you see the MTB and our lower numbers of 59. So, hopefully that helped you to understand the dynamics of paraxialin and US shale gas.

Yes, DK. I just thought that we already have a very low ethane in the U.S., which is 135 U.S. dollars in the third quarter. How low could it go? So going forward, improvement on intermediate, particularly on the MET, what's going to be the driver? Is that going to be an MET dynamic? Because Shellcat can't get any lower than what we already have in the third quarter.

Yeah, you're absolutely right. It will be driven more by absolute MEG prices and crude oil prices, naturally, because NAFTA remains strong. You have also seen NAFTA being stronger over Brent. It is now $110 a barrel versus 65, 70 earlier. So MEG rationalization outside Europe, Shell gas is driving the MEG prices. So you can see the MEG prices absolute still holding at 560, 570. So if the crude oil price remains high, this advantage will remain. It may not expand significantly, but I don't see MEG prices coming down because it's already people are still bleeding heavily in NAFTA base crackers. And people have taken action and everybody looks at per ton of ethylene, what contribution he is making, and people allocate more to high-density polyethylene rather than MEG. So this dynamics is playing, and you can see since 22 to 24, this is marginally improving integrated margins, MEG. So, Sheldon's advantage will remain. You're right. Third quarter was already very low. And can it be better than this? Certainly, gas prices can't drop below this. But MEG prices can move up. So, it will drop into this range of what you see, the integrated margins between 420 to 470 level, I would say. Thank you. Thank you.

Audience, if you have any more questions, you can ask them now. I don't see any hand raised, but there's one suggestion from Sergey in the chat box that there has been a couple of savings and initiatives we've been talking about. So if you can summarize them, it will be easy for audience to understand.

So I think we talked two pieces of savings. Can you go to the fix? I think it's an important thing. Maybe you might have listened to different numbers. One is rationalization of assets. OK, so we talked of seven assets in capital market day. We took major steps. First, we attacked all the high-cost assets. So we are talking of $160 to $170 million fixed cost reduction. And this is majority coming from four large assets, which is Rotterdam, Canada, Portugal, and Australia, Indo-Venia. Then Diago talked about which will actually translate. This will translate into a beta increase of 140 to 150. Then Diago talked about fiber rationalization, 60 to 70 million dollars, which are basically driven by fiber division to rationalize assets. He talked about the removal of the layers of the management, which translates into 22 million dollars. You are removing from high cost assets. manpower reduction and going to global capability center. Just to remind you, global capability center is in India, in Calcutta, which is the much more arbitrage of the cost. Then he talked about consolidating the two. So these are on top of it. And I think with us, maybe we can circulate these two different types of savings.

And I think there's one more question on this, the land sale value, because that is also an income. So it will be coming in 2025 or in 2026. So we are working on it.

Yeah, so the Australian land is the most valuable land in the housing area. So which is I think will come in 26, 25 and 26. Then we are talking of Canada land and then Rotterdam. Our leased land is at a very cheap lease rental. So we'll account for this as the disposal takes place.

Thank you. I don't see any more hand raised here, so there are no more questions.

Thank you. Thank you very much. Thanks for your patience. It has been a long call, one hour, 15 minutes, but one hour, 45 minutes actually. So thank you very much for your time and I appreciate it.