Indorama Ventures Public Company Limited (IVL) Earnings Call Transcript & Summary

[Audio Gap] Capital Markets Day with the team, a new era of growth and value creation. Joining me today is our group CEO, Aloke Lohia; our CEO for combined PET and Integrated Oxides and Derivatives, D.K. Agarwal; our CEO for Fibers business, Udey Gill; our CFO, Sanjay Ahuja; our Global Chief HR Officer, Roberto Bettini; and our Chief of Strategy, Deepak Parikh; and our Chief Recycling Officer, Yash Lohia. As a reminder to you, this briefing is being recorded. The slides for today's presentation can be found on our website, along with our media release. I would like to remind the participants that the presentation includes some forward-looking statements, which are subject to risks and uncertainties, and they are made based on certain assumptions. Participants and readers are therefore encouraged to refer to the disclaimer on this slide. Before we start, I'd like to briefly walk you through to the agenda for this session. Mr. Lohia will kick off with an overview on IVL's transformation journey and our strategy up to 2023. Dr. Deepak then will walk us through the cost transformation program that IVL has launched this year. After that, we'll hear from each segments, starting from our combined PET, with a deeper look at recycling from Yash and Integrated Oxides and Derivatives from Mr. Agarwal and Fibers from Mr. Uday Gil. We will then walk you through to our efforts to develop our leadership team to realize our long-term vision and strategy to be covered by Roberto. We'll then end the presentation with a discussion on the strength of our balance sheet and the key takeaways to be covered by Khun Sanjay. I'd like to start. I know that we all -- you all have a lot of questions. So we know that you want to know that what happened to the IVL gas cracker but that, we just started yesterday. I mean we just announced yesterday, and what's the impact on this China, the overall outlook, what's the ideal plan for the future, what's the impact on the single-use plastics, how we are dealing with that, is the PET a part of it or not, what the [ dispersed ] outlook, how profitable, how the Spindletop is going to contribute this year. So we know that all these questions, and we have the total management bandwidth out here. So we encourage you to ask questions. So the question we have allocated about 30 minutes at the end of the presentation. So please note all your questions, which you can ask once the session is over. In between, we will take about 10 minutes break, and we have an exhibition out there. So I encourage you to have a coffee in the coffee break, and then you can look around at some of our products. So with that, I invite our group CEO, Mr. Aloke Lohia, to take us forward from here. Thank you.

Thank you, Vikash. Very good morning to all of you. We, today, have the presentation, and I thank you for your time to be here. We, in the last couple of years, 2018 and '19, have an extreme results. 2018 was a result much better than we expected. And then 2019, equally, was a very poor result. We will be announcing our full year results on, I think, 26th of February. But meanwhile, we have enough data over here to share with you and especially share with you where are we heading to 2023. So the way we use the last 6 months since we saw the business declining is to take a very deep dive into our businesses. We also use the opportunity in the last 6 months to get our 2 new senior executives, our Chief HR Officer and our Chief Strategy Officer, to contribute to understanding what Indorama is. And it always helps to take a view of your business from a different lens. We have just concluded our global management conference on last Saturday. So we are fresh of getting all these plans that we are going to talk about of the teams that lead these businesses. We have 5 strategic priorities, and we'll go through -- I will go through them in brief, each one of them. We have 3 broader businesses of Combined PET. This is a new term, Combined PET, rather than Integrated PET. It consists of most of the aromatic businesses that we have. Then we have the Integrated Oxides and Derivatives business, which has got supplemented since you all are familiar with IVOG EO/EG plant in Clearlake, Texas, which got supplemented with the cracker startup in Louisiana, which was announced last night and with the acquisition of Spindletop. And the third large leg that we have is Fibers, which mostly houses all our high value-added businesses. So these 3 broader businesses, where they are in the cycle, what are our assumptions for these businesses and where they are expected to lead going forward will be covered in our presentations today. Next, please. This slide, you are familiar with. But just, again, to recap, we are the world's largest PET company. Globally, 1 out of 5 PET bottles are made from our resin. In the West, practically, 1 out of 3 bottles are made from our resin. We have a diversified asset base across 33 countries, and they are all in attractive customer segments. Approximately 90% of our businesses cater to daily consumer necessities. In Fibers, equally, we have a very strong position and that 1 out of 2 premium diapers are using our fibers in them and 1 in 4 airbags use our fibers in it. The recent closing of Spindletop, the Integrated Oxides and Derivative business, gives a huge momentum to our Integrated Oxides business. And all of this, 90% -- 95% of this is based out of North America, which has the advantaged raw material as well as the largest per capita consumer in the world. We have a very strong presence all over the world. We have some presence in China, but the advantage of our global footprint is that events like the current coronavirus, for instance, has a very limited impact on us because our supply base or our supply chain is spread all over the world. Next, please. This slide is to talk about how we got here and what did we do during this journey. You will all remember, we started off as a pure-play PET company in the '90s. In the last 10 years, since Indorama Ventures was listed in 2010, we have expanded our footprint into more businesses, and you will see in the next slide how each of our businesses are interlinked to each other. So while we have grown the integrated PET business, we have also grown other businesses in the Fiber space and in the Integrated Oxide and Derivatives business space. And altogether, we have a journey that has continued to do us good. We have continued to deliver above-average returns and above-average cash flows. There's a new terminology added in this slide, COMA, contribution margin. To me, as a operator, this contribution margin helps me to have a view on what are the initiatives of the company that are worth paying attention to. This slide has brought the EBITDA and the COMA on it. And then on the right-hand side, we have a graph with pro forma Spindletop earnings in it. As you will see, our fixed cost, that's a difference between the COMA and the EBITDA, has steadily risen over the years. Your cash gross profit has limited possibilities to influence because we are still only a small part of the world. But when it comes to fixed cost, this is something that we have an internal hold on. So by having this number in front of us, we can look at what are the internal initiatives we can drive to improve our overall cost. The theme for us is cost transformation. We have 5 teams. Cost transformation being the leading one, that is the first presentation you will hear after my presentation, on where we are going and how we are doing it. So let's carry on. So how did we build our business? As I said, we started with PET in the '90s. Very soon, we were in the Fiber space, polyester fiber and in packaging. That opened up the Fiber space for us. Then in the last 10 years, we added upstream integration in the form of PTA and MEG. This is a business that did well for us up to a point. And then when we started having the extreme capacity buildup in China since 2011, we saw the historical low cycle on PET at that point. We did not stop here. We continue to develop our business with HVA businesses that is in Fibers. And today, we have 3 segments of mobility, hygiene and lifestyle. These are all 3 global businesses, all $3 billion businesses. And this is one of the businesses that also you would hear about today, where we have a growing EBITDA on an absolute basis, but we have also invested a lot in this business. So our return on capital employed is -- has a lot of legs in this to improve. And you will hear from Mr. Gill, what we are doing to improve the return on capital employed of this business. Lastly, on the MEG side, after the IVOG cracker in 2012, we started building our cracker in Louisiana and recently announced and also absorbed Spindletop. All these 3 businesses are large businesses. Going forward, I'm giving a sneak view in 2023, the Combined PET business would only represent 50% of our earnings EBITDA, which, today, stands at 74%, 75%. The remaining 50% would come from the larger portion -- slightly larger portion will come from Integrated Oxides and Derivatives and the rest from Fibers. Next, please. On the PET -- Integrated PET, Combined PET, there's a lot of information that Mr. Agarwal will share with you. I would like to share with you that this is 1 plastic, which is in good demand. We have issues with this because it's a plastic. The consumers cannot differentiate between a good plastic and a plastic. PET, the plastic that we are in business for, has -- in terms of cost, it is much more affordable for the customers, for our customers, for the brand owners. And we have heard repeatedly from our customers now that PET is a circular plastic, and this is a packaging that they intend to keep. Why are they saying this? They are in the business of beverages. They should not care what is the form of packaging as long as it's a good packaging. The reason they care is because PET also has the best attributes for climate change. The larger question in front of all of us globally, when you talk about the Australian bushfires, when you talk about serious events that are taking place all over the world, the climate change is a big topic. So whatever one can do to reduce the carbon footprint is a step in the right place. And when it comes to PET, PET has the best carbon footprint of all forms of packaging, whether it is paper, aluminum or glass. Next, please. What makes PET attractive is circularity. It doesn't need to get downcycled. I don't deny today there is some downcycling of PET because we are only relying on mechanical recycling, but we are working on also chemical recycling. With chemical recycling, we will be able to take a lower quality feedstock back into the monomer and make a fresh PET or a fresh Fiber. Essentially, we will be able to upcycle the entire PET back into its original form or even in a better form. Next, please. On the Fibers business, this is a business we have taken great pains to build. We have put a lot of capital in this business. We have invested, in the last 10 years, some USD 2.5 billion in this business. So we did not do this investment without an end game in mind. Yes, we had to invest in advance. But then when you are building a business, when you are building a long-term business, which IVL is, we are happy that we now have the assets. We have the people we have the international property, we have the technologies, and we have the customer intimacy globally to make this business a very profitable business for us. Currently, it is in low single digits. Our Fiber team, which has been divided into 3 focused business managements of hygiene, mobility and lifestyle are fully equipped now to go forward and for each of them to create returns in double digits. This is one of the businesses that is expected to deliver us a good, steep earning improvement over the next 4 years. Next, please. Mr. Agarwal will cover this slide in more detail. Basically, we are in 2 businesses. We are in the business of cracking, which is based on [ heated ] or gas supply, for which we are based in the best location in the world, in the Gulf Coast in USA. So we have advantaged raw material. We have 2 small crackers, and these supplies are all for internal consumption. On the right hand, we have the downstream opportunities, the very basic of which is MEG. But then as you add value to your ethylene oxide, it goes up to 3x the value that you create only from MEG. Within it, we also have the propylene oxide business. This goes into polyurethane, and that opens up the possibilities for Indorama to continue to grow beyond our 4-year horizon now. And that is what IVL is all about. IVL is all about creating shareholder returns. And we create shareholder's return by keeping a leading position in every business that we do, being global and also being the most competitive. And you will hear all these things as we go along. Next, please. Just to share with you 2 examples of large businesses that we acquired in the last 10 years and what was a return that our shareholders have received from these 2 businesses. And obviously, the returns were not because we were fortunate in our cycles, but it was because the management of Indorama Ventures is a management that is impossible to replicate, impossible to duplicate. This is a global team. We have people from all nationalities. We have 33 countries that we are present in from a manufacturing point of view, not even counting the countries where we have marketing or sales operations. So we have a lot of nationalities, and we are able to click together, work as one IVL because the theme is we have the ability, so let's deploy our ability. We have an owner, which is Indorama Ventures, who is willing to invest in the right asset for the right purpose. We bought this plant in Map Ta Phut in 2008. And since 2009, so roughly 10 years, we've been operating this plant, and we have grown this plant. As you all know, Thailand is not known for its cost competitiveness for commodity or basic textiles. It's considered to be a sunset industry in talent. And this sunset industry has been known for the last 30 years. Even the first time I came to Thailand 30 years ago, the mandate I was given was don't get into textiles. Do things that Thailand is capable of and be competitive in. But nevertheless, we used the Map Ta Phut site. We added some new businesses to it. We added some HVA businesses to it. We improved the productivity. We improved the cost structure. And this business has given us a 13% ROCE over the last 10 years, which is not bad. And the same example can be repeated when we come to SK's asset that we bought in Indonesia and in Poland. We have grown our Indonesian franchise quite a bit that -- this business was probably the first business we bought in Indonesia, if I remember. But since then, in the last 10 years, again, we have a large presence in Indonesia. Poland. We were in Poland. We were in Europe. Yes, we were in Lithuania. We were in Rotterdam when we bought Poland. But look what we have done in Europe now. We have, again, a strong presence in Europe. And this asset, the 2 assets of Indonesia and Poland, have combined, give us a return of 16% over these last 10 years. What is also remarkable about these 2 examples that we chose is these sites do both PET and Fibers. So we have 1 team. We have 1 team that runs our businesses, and there is no division in Indorama. Next, please. On this slide, you would find that our -- at the bottom bar is basically, we have given you the historical ROCE and the historical operating cash flow that has been generated. There's many time a question from our stakeholders on our leverage. What is important is that we have created a ROCE over the last 10 years of about 11%. But our OCF has been around 15%, so 400 basis points higher than our returns. We have a very keen management. The management values the value of money. And therefore, they keep the right amount of capital in the business. And we, therefore, also -- our purpose is to create shareholder's return. Our vision is also to meet their certain needs. So how in a good corporate governance, in a good ESG manner, create very good returns for our shareholders? All that is a balancing act that we have to do. And our leverage, in my mind, is quite appropriate for the amount of OCF that we generate. The 2 trend lines on this bar historically shows you how we have created larger basket of earnings potential over the basic PTA PET spread, which is based out of China. As you know, China is the world's largest producer of many goods, but especially polyester. Some 2/3 of the PTA, the 2/3 of the Fibers, polyester, they are produced in China. So there is a lot of things to think about with regards to coronavirus. How would the global supply chains get impacted because 2/3 of the production comes out of China. It gets mostly consumed within China, yes, but they do impact the global supply chain. But the point on this slide is that we have expanded, over the last 10 years, the premium and the opportunities of value-added businesses that we have in combined PET. This slide is Combined PET, not Integrated PET. And the gap between benchmark China spread and Indorama PET is about $150. Next, please. As we look at the next 4 years, what we find is that we are in the downcycle of most chemical businesses, and we are not going to be any different from that. The downcycle is also pronounced because of the various capacities that China keeps adding. So what we decided in the last 6 months is we are not going to say that China will stop growing because it's probably likely that China will never stop growing. So let's assume that if China continues to grow, how does IVL prosper? Is it going to be that only China prospers and the rest of the world doesn't? Or is it that China will do what it does and then companies like Indorama would find its way on how we deliver results? How do we deliver above-average returns to our stakeholders? What do we have? We have the first bullet point on top of here, which says that we are in North America. We are actually Americas. Somehow, Americas is a distance from China. We will feel the ripples probably, but we won't get flooded. And today, about 50% of our total business comes from North America and from Americas. And we also get the best quality of our earnings from that region. The attention to plastics is a very genuine issue. Consumers -- I can appreciate why the consumers would not want to feel happy with the filth that they see on the streets or in the rivers or in the oceans. And that genuine concern now is translating in all societies making measures, all governments, all companies, paying attention on improving this. So the problem is of trash. The problem is not of plastics. Again, in the previous slide, you saw that PET is one of those plastics, which has the best attributes and both from a climate change perspective, from a carbon footprint perspective, from a cost perspective, from the circularity perspective. And therefore, we see this as an opportunity. This is 1 area where we have, in the last year, even taken steps to make this a focused group. We have a whole team dedicated to this cause, and you will see it is a profitable business, too. Next, please. So when we were making our plan for the next 4 years, everybody was in disarray. The spreads in the petchem business has been at its historical low and not for PET, not for PTA, but for most petrochemical products. In one way, it is good that when we are making our plans, we have to worry less about the downside risk. It's only a question of where do we see the recovery and how much of a recovery can be built into our plans. Through your Q&A, through your further work with our Investor Relations department, through the presentations you'll see today, you will find that we have not been very aggressive in our expectations of the recovery of the spreads. We have maintained our spreads over the next 4 years at close to current levels, nowhere near the last 10-year average. Next, please. This is 1 slide that I want every IVL employee to have on its display picture. This tells every IVL employee where we are, what we are, where are we going. It covers all attributes, all aspects of what Indorama is and what Indorama is working towards. I mentioned the 5 strategic priorities, and I will cover them one by one in the next slides. But this is one mantra. Next, please. So the first one being cost excellence. For the first time, we have a formal project called Olympus. This should cut across every business of IVL and also the corporate offices of IVL. Everyone is part of this transformation project. It is led by Deepak Parikh. There's a tracker on are we delivering on time. You'll see more details about this in his presentation, Deepak's presentation next. But this is very invigorating. This is something that is very pleasing that we have a business, which has a potential. And though we do, we have always told you that our DNA cost -- did we ever forget to tell you that? No. We have always told you our DNA's cost. We want to take that one step forward. We want to define that. When you see our DNA's cost, what exactly do you mean? Who are your competition? Because the world is changing. People are building larger plants with newer technologies, and we have all these legacy assets. There will be right assets for the right location. We do advantage from a total delivered cost point of view. But we have 120 sites. There's probably potential for us to do some improvement on our loading across the sites. So there's a lot of work to be done on this, and I'm glad that we are taking this, giving this attention to this very important area. And we expect to get to $350 million of run rate EBITDA improvement or run rate savings by 2023. Next, please. The second pillar is asset full potential. This also includes our working capital management. As you have seen in 2019, we have had huge inventory losses, though noncash but still significant inventory losses. So we have, in our minds, and we have discuss with our teams, that we had to take better control over our total manufacturing footprint and our total supply chain management. And that is why when you see the finance presentation, you will find that though we are increasing our tonnage by 40%, but our net working capital is not increasing. That's important. That is how our ROCE, our return on capital employed is improving without consideration of the cycle improving. So that is productivity. That's efficiency. That is management. And our people have done it, and our people capability is getting further improved with all the attention and all the focus that we are putting on our people management. Next, please. We are a growth company, and we don't intend to stop. I hope none of what I'm saying leads you to believe that we are going to stop growing. We are going to be improving our earnings. Yes. That is something that has to be done on a continuous basis. So we just want to bring that culture back of continuous improvement. We are a larger company. It's no more a PET plant in Lopburi or in Saraburi or in Nakhon Pathom, where you could drive and you could fix things. We are in places where it takes a day to get to. So we need a process. We need a system. We need a centralization of information to make things happen. But where we will grow now at least in the next 4 years since we have added a lot of basic infrastructure already? We intend to grow in the packaging business because we find the returns very healthy. It also helps us learn what our consumer mindset is, what our customer mindset is. And we also want to leverage on Spindletop. On Spindletop, we have this new additional business of surfactants. Within surfactants also, there's a range of basic and specialty. So we want to add more surfactants, and we have business in India in surfactants. We have business in Australia. So we do want to study this globally and find opportunities of growing this business globally. Both the businesses of surfactants and packaging are downstream businesses. And as all of you know, downstream businesses give you a better return if managed better. Next, please. Our recycling targets are well advocated. We have made a pledge of 750 kilotons of recycled PET by 2025. We have a dedicated group heading this, and you will hear from Yash what his plans are. Our internal targets are even bigger. Our internal targets are to get to 1 million tons. We have also announced that we will be willing to invest up to USD 1.5 billion towards this business. At the moment, you will hear from Yash what the CapEx is and what the target -- what the 2023 objective is. Next, please. While we talk about businesses and profits, one thing has become very clear to me now that unless we talk about our ESG, unless we talk about our governance and unless we talk about our societal impact, these businesses will not last forever. Even our vendors, our stakeholders who support us, they have a checkbox and they're serious about it. They want to know that, "Are you a good business relative to a profitable business?" So we want to be both a good and a profitable business. And thanks to our sustainability, we have won accolades. Only last week, we were told that we are amongst the top chemical companies in the FTSE4Good project. As you know, we are also the second best chemical company in the world as per the DJSI ranking. But none of these are something that we are going to just stop working on. We still have a carbon footprint, especially in Asia, that we need to work on. But what I was surprised is that as we added these crackers, the Louisiana cracker and the Spindletop cracker, our environmental footprint actually became worse. And we realized that the emissions from these crackers are higher than from midstream businesses or downstream businesses. Anyway, we are dedicated to discuss, and we are working every day in improving our own footprint. Next, please. So everything I spoke about so far was managed and delivered by people. Nobody needs to be told that. Nobody needs to understand that. Everybody knows that if it wasn't for people, there won't be a business. There won't be an ambition. There won't be an aspiration. But at the same time, we know that the same people have been running our business for 30 years and our journey doesn't stop here. Our journey goes on for the next 30 years. What are we doing? And the complexity of the business is not going to get easier, delivering the word of VUCA business, we are larger business every day. So all our management traits, all our business groups, they have to have added support and quick support to manage the business in the best possible way. You will be hearing -- there's a whole presentation on this by Roberto. You'll hear that later on. But this is the pillar of our success. We all know that. We all know that. What I'm saying is we should not forget that, and we are not forgetting that. We are laying all of the highest priority on this one. We can get the financing to build a business. But to get the right talent and to build the right talent, that, money can't buy. Next, please. So this is something that you may be wondering, where is all this talk leading up to? So we did the initiative of saying that our last best year was 2018, which was a $1.4 billion EBITDA. There would be -- we'll be in 5 years from then in 2023. And we believe that we would be at $2.4 billion to $2.6 billion of EBITDA at that point. With better cost control, with better inventory control, with the right growth projects, we would be -- continue to deliver the similar amount of ROCE that we delivered in 2018. Even our balance sheet would be, if not stronger, as strong as what it was in 2018. You remember, we have a AA- rating by TRIS. And the rating agencies depend on us to have a plan, which is prudent, and a plan that we are willing to navigate so that we do not put the form at risk. So I spoke about our OCF. How our OCF generation is like 400% -- basis points -- 400% basis points better than our ROCE, which basically helps deleverage or invest. All these pillars to get to $2.4 billion to $2.6 billion EBITDA is partly built on cost transformation. We have taken a steep decline in spreads. $600 million decline in spreads still to go on to make $2.4 billion to $2.6 billion of EBITDA. The entire growth earnings that are coming over here are based on announced projects. There may be some unannounced projects in the recycling space. But whatever we have announced, whatever we have even approved at the Board are all part of this. So very little money is left over here, which are yet to be committed to. And all of that is only in the recycling space. Next, please. Coming to the closing slide to sum it up, basically, as I said, we'll have a 40% increase in our volume to 17 million tons, and our capital employed would have grown to $10 million to $11 million, which it is today already, basically. After the Spindletop acquisition, we are at that level already. With our WACC at single digits, making a 13% to 15% ROCE is quite respectful. And our debt service coverage ratio, which is something that is important from a health point of view, from a balance sheet point of view, is at very solid levels. Next, please. A glimpse into what did we take the Integrated PET industry benchmark assumptions at. It is very similar to the slide you saw in the opening. That slide was from 2011 to 2019. This slide starts from 2014 to 2023. The red line shows you what is the industry spread we have taken for our consolidation. And you'll see even the value-add on top of the industry spread. We have maintained it similar to what it was in 2019. And 2019, remember, was a tough year for us. What we have going for the Integrated PET business, or combined PET business, is our recycling business and Corpus Christi towards the later part of this plan. And as you know, Corpus Christi, our North American businesses, are at a substantial premium to Asia. You'll also see in the bubble below that Combined PET business as a representation of the total IVL is dropping substantially from 70s into 50s, which means that we have a more diversified business. Let's say, the combined PET business is the plastic business, the Integrated Oxide and Derivative business is the chemical business and the Fibers business is the Fibers business. So we have a much better and diversified portfolio, better in the sense that we have more legs for the future to grow in. Next, please. Sanjay will explain this to you, but we have always been very caring about our balance sheet and our ability to fund. We have hit the peak at 1.4 net debt equity with the Spindletop acquisition. But then within the year of 2020, we'll start deleveraging already and get to below 1 by the end of this plan. Next, please. So we have, again, 5 takeaways from my presentation. I have over exceeded my time limit. So why don't I just put this in front of you, while the next speaker comes up? Because this -- I've spoken about all these imperatives already. Thank you.

Good morning. As Mr. Lohia mentioned, over the next 12 to 24 months, the cost efficiency is our primary -- okay, that helps. As Mr. Lohia mentioned, the cost efficiency and project Olympus is one of the key focus area for us as we go forward in the next 12 to 24 months. It's one of a kind, first in IVL, up about focused $350 million of cost transformation program that I'll walk you through. As highlighted, we've been growing through acquisitions over the years. So we have had about 20-some integrated assets that we had in our portfolio over the last 20 years. And those assets have been of different types of scale, operations and systems in place. So to put in perspective, for example, we have 15 different enterprise systems in the company because of the different acquisitions came with different work processes. But at the same time, our core strength has been, and it's very been successfully been done by Mr. Lohia, D.K., Mr. Gill and Sanjay, who is our CFO, this has been put together very nicely with integrating and realizing the synergies and what we did in terms of that, improving the cost efficiencies, the rates at the sites, consolidated the procurement, reduced the fixed cost and also shared some of the best practices around the world. But at the same time, we realized that there's a further more opportunities in realizing deeper synergies across these assets. So we've done significant effort, but still there are several pockets. When you have 120 sites, there's always some more opportunity to find areas where we can sync the synergies and contribute towards the overall project Olympus. So this IVL launch Olympus is towards the deeper integration and cost efficiency across the portfolio. It is not across 1 vertical, but across the entire organization of IVL. So in order to do that, what we will do is also look at all the site, streamline the portfolio of the sites. We will eliminate duplication of all resources and spend; standardize the systems and processes across all the different functions: procurement, supply chain, finance, IT, HR, et cetera; and deepen the best-in-class practice for sharing. Now this consists of 2 key segments. The first 1 is the corporate-led initiatives, and this is where I'll walk you through. But there are 3 elements in that one, approximately $90 million to $100 million of run rate savings that we want to accomplish by 2023. And the other one is business-led initiatives, and that consists of manufacturing excellence. There's a significant footprint that we have globally, and there are areas to improve using Lean Six Sigma methodology and few other tools to reduce risk at every level and increase efficiency, also leverage our tools for procurement, supply chain and overall SG&A. So that will contribute approximately $240 million to $270 million run rate by 2023. Now let me share with you the elements of the corporate-led initiatives. These are some of the new things that we're starting in IVL. The first one is one ERP platform across the company. So this will be transparent across the whole organization. Many of the world-class companies have it. At the same time, it's a complex journey, and we are embarking on that. Our Board just approved this last week to initiate this whole program of enterprise installment. This is one of the best-in-class methodology and software from SAP S/4HANA is what we're going to institute, and I'll share some more elements. The second one is the global business solutions. Essentially, it is a transformation of the activities to centralize as much as we can into the countries where there's more efficiency and we can leverage the labor arbitrage. And so we're going to be putting several of our activities under the GBS into India, and I'll talk to you in a minute. And the third one is initiating the digital program. It's a buzzword, but what we found is there are several areas that we did during 2019 that we will leverage more as we go into 2020, and I'll share some examples of what we're doing in that space. So the key thing is SAP and S4/HANA implementation will take some time, but by 2023, we're expecting a minimum of $35 million to $40 million of saving. Similar in the case of GBS, by combining some of those activities under one roof, we're looking at about $25 million of net run rate saving on EBITDA. And then the third element on the digital with manufacturing as well as in the procurement, supply chain, we're looking some in the vicinity of $30 million to $35 million of saving. So that adds up to approximately about $100 million by 2023. A few words on the ERP integration. The first one is -- what you see here is that the biggest chunk is coming from procurement and operations. And what we're trying to do here is that as we institute this one ERP across, the visibility across all the 120 sites to the corporate increases significantly. So today, we have to manually get a lot of activities, but this will be all streamlined under the one platform. And this will enable significant cost reduction because of visibility, transparency and standardizing the key processes: accounts payable, accounts receivable. All the things can be streamlined with this one ERP system. It's a multifunctional, cross-functional global project, and it will take some time. It's approximately a 3-year journey. About 90% of the other companies in the chemical industry have more or less gone towards the S/4 as the platform, which is one of those things that also goes to the cloud. So it doesn't matter where your plant is, where your asset is, you can retrieve all the information on one go, very, very decisively and quickly. So it's a chain management through the company as part of the project Olympus. We'll be driving this with much more finesse and tenacity to improve and upgrade our entire work processes. And it is also -- S/4HANA is also enabler for what we want to do with the digital initiatives. Because, again, you hear the word digital as like oil is -- data is new oil, and all kinds of adjectives used, but the reality is the data will be available because of what we're doing with S/4HANA. And also the GBS, the back office that we want to put will also be enabled because of the fundamental shift that we're doing with ERP. Global business solutions. This is the one that I'm talking about, the back office that we want to set up in India, and then we will do some other locations based on the language, like countries like Poland, we can -- because of the language, China, Thailand, maybe. So we are looking at some of the smaller hubs in the different countries, but the main hub, we're going to be looking into India. And as we look at all the functions around the globe, HR, IT, finance, we can be looking in the order of about 800,000 people for our size of company of $14 billion in revenue approximately. There's a significant opportunity for us to leverage the labor arbitrage for the transactional activities that happens in the higher-cost countries, transfer those activities to India. And this is nothing new. Most of the companies have done it. We are in the process of starting that under the leadership of our CFO, Mr. Sanjay Ahuja. And also, this will give us standardizing and improving the quality of the data we get across all the functions. And here, we're looking at a new savings of approximately, on a minimum, of $17 million by deployment of GBS. And we're also doing another project in parallel for finance transformation and expect in the vicinity of about $9 million by 2023. So this is a significant undertaking as well. And with help of our business leaders, we are pulling this in place step by step, and we started the journey already and looking for location in India for that one. Next one is digital. Here, we have started the program. We did 9 pilots last year. These are 2 examples in one of the businesses in the fibers, Auriga Fibers in North America. We were able to do a reduction of 30 percentage of transition cost, simply product A to product B by doing it more effectively leveraging the data. We were able to demonstrate that. Second one, we did in our Decatur, Alabama plant, where we reduced the paraxylene loss by having the better visibility of the reactor and the process conditions. These are some engineering aspects, but the beauty of this is what we did in some of this pilot during 2019, we are ready to leverage across the company in 100-plus sites. And there's a significant cost savings that we're expecting somewhere about $6 million from these projects, just what we did. About 30% of all the value has been realized already. But the most important part in the process, we have converted about 100-plus of our employees with hands-on experience in the manufacturing of what they did and how can we leverage across the site globally. So this one is the summary of the digital, of what we're trying to do is the 2 areas. One is in the case of manufacturing. Basically, what we did, leverage across as many sites as we can in the company. The second one is also because of the predictive tools that digital methodology offers, we can understand that by looking at some of the noise or the temperature, et cetera, we can do the predictive maintenance. As Mr. Lohia mentioned, some of our assets we acquired have been a couple of decades old and so on. But by methodology like this, you can -- the predictive maintenance is much more effectively enhanced, reduce some of the unplanned shutdown that could happen significantly to 10% to 20% at least by doing this methodology. So expecting about $12 million of saving there. And then in terms of the procurement, indirect procurement. We did a fantastic job on the direct procurement under the leadership of Mr. D.K. Agarwal. But there's also a significant amount of indirect procurement that we have across the company. And what we're trying to do is that put it under one umbrella with better visibility, different categories, and that's another area we're targeting, a minimum savings of at least $9 million of run rate on that. And look at the entire value chain, where the material is coming, where it is flowing and optimize the S&OP, take the customer orders and put that in. So all put together, we're looking at supply chain optimization as well and about $11 million coming from that. In the businesses, we're doing 3 different initiatives. One is in the manufacturing excellence, second one is the procurement and supply chain, and then third one is SG and functional excellence. The biggest chunk of this is going to be in the manufacturing excellence by optimizing our operations and looking at the waste reduction in energy, raw material usage across the board. And this is where we want to work with every site. So that's about $130 million to $140 million, and then other ones are outlined, but the bigger chunk is also in the SG&A overall cost reduction. This slide Mr. Lohia has showed, so this I repeat, but just to sum it up, that where we're going to be getting the money, $100 million or so approximately from corporate initiative and about $250 million or so coming in from business initiatives. And Fiber business is one of the biggest contributor, and you'll hear from Mr. Gill about some of the elements of operational excellence and how we plan to achieve that. And also, we'll be tracking it very religiously of what we're doing step by step in each of the businesses and corporate initiatives. And this is one of a kind program, sort of new, at least the digital and the ERP, et cetera. So what we're going to do, we'll track it on a yearly basis. So the first year, we're looking at approximately $70 million of saving primarily to come from our operational excellence and SG&A and optimizing the activities, what we do in each of the businesses. And so second year, we will see some influence coming in from the corporate initiatives. But this is a journey. It takes about 2-plus years to have some of those things get going to contribute financially to the bottom line. So the ERP, GBS, that's the global business solution standardization, back office and digital will contribute from 2021 and 20 -- onwards. So we're looking into third and fourth year, '22 and '23 is when some of those contributions will come through. In order to drive this, as Mr. Lohia pointed, this is something we will be -- we are committed as a team. So the -- our senior leadership team is going to oversee of how are we initiating this program throughout the IVL, and it's going to be orchestrated and managed actually by the 45 leaders that you saw of the company, the IBC, our global leaders, who will be taking regional responsibility in each of the 3 major regions, and they will look at everything across the region. And each of the sites will be contributing towards the course of how best we can do this. And this is a new way of working in IVL. While we're driving for growth, we will also focus on -- significantly on the cost component, wherever money is being spent. And it's -- as Mr. Lohia said that we are -- our D&A's costs. It was viewed into it. What we're doing, we're just highlighting and putting a bit more structure in governance around how are we going to do this. And the whole important part is while we're playing offense on growth, what we delivered over the years, the objective is to also do the defense and make sure we also have every aspects of cost understood and under control and trim it as we go forward. So it's a journey. We started that already, and we are in the process of doing a lot of the things and the new future-readiness initiatives are going to contribute as we go forward as well, and these are the summary that I want to leave you behind as Mr. Agarwal comes and talks about the Integrated PET business. Thank you.

Very good morning. Thanks, Deepak, for the cost optimization program. I'm going to present the Combined PET, and what is combined PET means is the Integrated PET, which is PTA, PET, paraxylene. We have put specialty polymers, which is basically specialty chemicals, specialty polymers, NDC, IPA and the packaging. So this is what is the new terminology, combined PET. And let me tell you that this is a cash cow of the company, okay? So what this business has delivered so far? So as you know, we are the largest producer of PET resin globally. We are about 20% of the world's market. But if you exclude China, we are nearly 30% of the world market. And today, coronavirus era, actually as the supply chain gets interrupted from China, we'll be able to serve our customers better. This segment contributes a very significant financial contribution to IVL. As you can see, an EBITDA of nearly $1 billion, $940 million in the last 12 months, representing 58% of the IVL's after including the pro forma of Spindletop, $360 million, which is showing a ROCE of 14%. How we have been able to do this? A very strong backward integration because that is very, very important, backward integration, because you capture the whole value chain. Second, in commodity business, it is very important that what is your cost structure. We are in the top quartile cost structure globally, whether it is Europe, Asia or Americas. Third, which is very important is the global PET footprint. We have 59 manufacturing sites globally in 22 countries, and that's global diversification, meant access to the customers, very close to the customers, and you unlock the value. We believe that this chain, PET, will continue to deliver very strong returns for IVL and its shareholders as it continues to be the choice of material for beverage packaging. So this business will continue to grow. As you have seen historically, it's very easy to acquire the assets, but integrate them is very, very important. And that's what we have successfully done. If you look at the PET, I think Mr. Lohia covered it very well, speaking of beverage packaging, we believe that PET will continue to be an attractive segment with significant headroom for growth. A good example is India. Last year, Indian growth is about 20%, 1.1 million ton market. Per capita consumption is still 0.8 kilo. While globally, the PET consumption in the world is about 4.5 kilo. So this polymer will continue to grow. There has been changes. There is a conversion happening from different polymers to PET. A good example is the yogurt cups, which is going from polystyrene to PET. As you will see on the left-hand side of the chart, PET has seen a strong growth for over the last 12 years. Not only the beverage packaging has grown, but PET share has increased from 40% to 50% and projected to grow up to 56%. So this business will continue to grow. This growth, as explained by Mr. Lohia, is driven by a few reasons. First, PET is cheaper. It is cheapest way to deliver the beverage and lighter than glass and aluminum cans and as important functional characteristics such as resealability. You can reseal the container back, which is not holds good for the can. However, the drivers of the future will be different as environmental footprint becomes the top of the mind. The PET's environmental properties will be very critical. As you know, PET is only 100% recyclable plastic. And you will be surprised that high-density polyethylene is difficult to recycle, and it's expensive. Today, the HDP/rHDP price is about $2,500. And PET has a lower carbon footprint compared to aluminum cans and glass bottles. Given the many beverage players, as you can see, claims made by Coke CEO, including Coca-Cola, have reiterated the importance of PET as a packaging material, but with a greater commitment to recycle content. And you will see Yash giving you the landscape how we are expanding our recycling business. So we expect PET to strongly grow. This is a 24.5 million ton business, will continue to grow 4.5% in the future as the growth for virgin PET will be centered to developed economies. In developed economies, it will be lower, the virgin, and rPET will grow more stronger. But in developing world, like India, as I mentioned, the growth will be very, very strong. This slide, Mr. Lohia covered, 2018, we showed a very good integrated PET spread, right, because the 2 major players, M&G and JBF, had interrupted -- they went into bankruptcy, so there was interruption in the supply. So in future, we will normalize this spread, but you saw one slide which Mr. Lohia showed that we will command a premium over the industry because we sell in the domestic market. We have premium markets like Japan. So our premium will keep enhancing because our domestic market share will keep increasing. So we have taken the PET spreads to remain, as you see in the forecast, a normalized level as additional capacity will come online. But outside China, again, as I reiterate, that the capacity utilization is very, very high, and the demand outside China is also increasing significantly. If you say 1.2 million tons, 600,000 tons increases outside China, and outside China assets are running at very high capacity. So utilization rate of PET are, therefore, expected to remain in the range of 75% to 80%. So we are very optimistic about the margins of PET. Let's look at the commodity business. It's very important what is your cost curve. This graph shows you United States cost curve and the EU-28 cost curve. We are very well positioned, as you can see, the blue chart, where our assets are. So we are in top quartile cost position in both United States as well as EU-28. Both have deficit markets. Europe imports about 700,000 tons. With our Olympus program, we will further reduce this cost and create an inherent advantage versus any competition which weathers out, so like the lower energy prices as well as high utilization of the asset. So this protects us from the positive margin in -- against import parity. Because most of these are deficit markets, so you basically sell on a premium over the import parity. This will not take into account any advantage, which may flow from -- basically from the trade barrier action. Europe today does not have a trade barrier action. EU, there's a free flow of the material. We'll be working on those trade barrier actions, so this will give us further advantage. So cost is very, very critical. Now this is a very, very important slide that what is IVL today, what is the reason to add value to our customers and the environment by delivering superior packaging solutions. How we will do it? As you have seen that we have delivered double-digit ROCE, we are creating cost advantage versus our peers. You saw that we have launched the Olympus program. This will drive operational excellence globally and cost reduction to see through this period of lower spreads. Second, we will continue to scale up our top line. How? Because we'll be selling more in the domestic market. This is both in terms of volumes. Corpus Christi project is on track and margins by enhancing our high value-added products. Third, as you know, the PET is recyclable. Mr. Lohia showed you a slide that how a recycling investment is being planned. And it is not a burden on PET, virgin PET, but it will create its own ROCE of 12% to 15%. And we are selecting these investments around the globe, whether it's mechanical or chemical by making sure that they are value accretive and the feedstock, a little bit easier. Then last, we intend to still explore the adjacency growth with PET. As you can see, I will show you another slide that where there are areas of growth of PET. Now let's go deep dive into each one of this. Deepak covered project Olympus. This will unlock nearly about $80 million. This does not include about $20 million, $25 million which we have already realized by way of procurement savings this year. And why we are not considered because eventually this will get transferred to the customers over the years, particularly in the MEG discount. So this is a combination of several cost saving initiatives: manufacturing excellence, which Deepak covered, that many sites we have actually launched, and we had a very detailed discussion with our CTOs through plant automation and predictive maintenance tools, and there's a lot of room in this area; procurement efficiency and supply chain optimization; functional excellence by optimizing manpower count. There are plants where we make 3,500 tons per person productivity. There are plants where we have 1,600 tons. So there's a lot of area to improve on this manpower optimization. Also, as I mentioned, that we are renegotiating on discounts on the key raw materials. We already unlocked about $25 million, so this will be an area of focus of cost excellence. Second, if you go to adjacency, this shows you that what are the opportunities in PET. I just mentioned you an example that how polystyrene is being replaced. Polystyrene is about 6 million-ton business. Polyethylene is about 180 million-ton business, and 5% of that or 7% of that actually goes into single-use plastics. So we will consider this adjacent growth opportunities that can be value-accretive to IVL's stakeholders. The heat map is a summary of a market study recently conducted by IVL on the packaging material, showing the effectiveness of the PET packaging material in various and new segments. As you can see, we've identified the beverage packaging market and the ready-to-fill bottles as well as food, home care and pharma packaging. The interesting part, as we acquired Spindletop, we went into surfactants. Now today, Procter & Gamble and Unilever, all they're looking for are composite solution that we can give them surfactants as well as the packaging material, which has a recycling content, so a lot of synergy between different businesses. This is one of many opportunities that we are studying in order to further expand and diversify our PET business. I should add here that these opportunities and assessment are stage and are nonadjustive. We'll continue to look at it. Our 2023 does not include any greenfield expansion or brownfield expansion. It's only threatening out the existing assets. So this PET segment will continue to explore and carefully prioritize any growth opportunities to ensure we do not dilute our management focus. Now coming to the specialty chemical business. I know you have been tracking the IPA. And the LTM third quarter '18, we made $172 million, and this business of specialty dropped to $61 million. And then we are turning back to $190 million by 2023. What exactly happened in IPA? There was a shortage of metaxylene. As a result, the IPA skyrocketed, and there was a substitution of demand back from IPA to MPO. So we have done three-pronged strategy. If you are aware, we had converted one of the lines indicator from PTA to IPA, and we are buying PTA. So now we are converting back to PTA from March, so this will start rolling the profitability in the second quarter of 2020, this PTA profitability. In IPA, we are going to tool it. Secondly, we are creating an extra demand because low melt fiber, there is a back -- substitution back to IPA. This three-prong, that creating extra demand, creating PTA in place of IPA and renegotiating also the metaxylene contracts because we buy most of the metaxylene contracts, this will all turn around the IPA business. We are already seeing signs in the United States markets as we are improving the prices in the U.S. market. We will also look at potential trade barriers if required in IPA because we are the only producer in Europe. And today in U.S. after the tooling, there is only a single producer. So within our specialty PET business, as I just mentioned, there are a lot of opportunities to make different types of polymers. We today are better resin manufacturers. We are an extrusion blow molding. Many customers are looking for solutions from PET, which is recyclable as compared to the other polymers like polystyrene and HCP. In NDC, we are the only producer in the world of NDC. We are also going into downstream like PAN and PNDA, which we have signed some offtake agreements with the customers. So all specialty chemicals will continue to work to unlock this value and try for this $190 million EBITDA by 2023. And this is already being done. You will see on the below graph how the volatility of the margins went. And today, IPA margins, our lowest ever experienced because of this oversupply situation. And even in our assumption, we have taken much lower than historical IPA margin, if you can see on that graph there. So what it translates into? 10 million-ton volume goes to 13 million tons. But interesting will be the graph on the right-hand side, where you can see from a $1 billion EBITDA, we are only showing $1.2 billion, $1.3 billion. We lost nearly $500 million of EBITDA. Why? Because of the -- as against 2018, where there was a peak of the margin, we have normalized those to the lower levels, and that's what the $500 million has been. But our premium will keep increasing because we are selling in Thailand market, wherein Indonesia and Brazil, we have 60% market share, which just keep increasing. Brazil has recorded back strongly with 3% to 4%. So as we continue to increase our domestic sale, this will -- we unlock $300 million. Similarly, on the cost transformation, about $100 million, as we said, Corpus Christi and other products will translate this into $1.2 billion to $1.3 billion. Recycling, as I mentioned, this will also contribute significantly to this EBITDA. All this together with a very strong focus on working capital, which as you can see, net operating capital employed only goes up from $4.4 billion to $5 billion will translate into ROCE of greater than 15%, much beyond the cost of capital. In recycling, as I said, it will contribute nearly $180 million, which Yash will cover. So if we just talk PET, what it is. We have demonstrated in last 10 years of building this business, a global footprint. We have integrated all the assets acquired around the world. We have become 20% of the world market; outside China, 30% of the world market. The industry utilization has been always low, but we are operating in those protective markets. We have a full value of integration. We are committed to create double-digit ROCE, as you can see. As more assets get depreciated, ROCE will keep improving. But we don't want to be complacent. And as you can see, Olympus project will embark a significant saving, and we will continue to explore adjacency growth. As I mentioned, this still does not cover any brownfield and greenfield expansion, which there will be opportunities in the developing world where the PET demand continues to grow. So thank you very much for this, Integrated PET, and we'll take your questions in the later end. Now we are going for a break, right? Oh, Yash is there. Sorry. Yash, please.

Thank you, Mr. Agarwal. Good morning, everyone. It's my privilege to be presenting the IVL recycling business to you all here today. At IVL, we believe the recycled PET will be one of the future growth engines for IVL and also highly complementary to our virgin business. We know there's a lot of unprecedented pressure on plastics, a growing focus on the environment and how we can protect it for the next generation. While all these pose challenges, it's also a tremendous opportunity for us and for PET, which is the only 100% circular recyclable plastic and also the lower carbon footprint packaging option compared to glass and aluminum. In line with this, many brand owners have set ambitious targets to increase their use of recycled PET for their beverage packaging. Many have recognized the value of PET and not just from an economical point of view but also from holistic sustainability standpoint. Therefore, PET, with the right collection and the right recycling infrastructure, will continue to be the preferred material for beverage packaging. The journey to increasing rPET content has really begun most noticeably in the selected bottled water products, you see on the right, showing their brands are turning their targets into reality. As many of these brands are also large customers for IVL, this presents another huge opportunity for us. Given these growth drivers, IVL has developed a strategy to be the leader in recycled PET, leveraging on our #1 position in PET. Our vision is to reinvent -- sorry, our vision is to reinvent PET as a trusted and safe material. Our mission is to serve the needs of our customers by building a leading, differentiated and economically attractive recycling business. How do we intend to do that? Number one, we intend to secure consistent supply of feedstock to the right partnerships and local supply chains; number two, we tend to scale up our mechanical recycling footprint while leading the way for development of chemical recycling; and number three, we will continue to develop strategic partnerships with recycling technology companies as well as use our own technical know-how to customize fit-for-purpose recycling plants; and number four, we intend to be the leader in developing and integrating the PET circular ecosystem. Our measurable targets include growing our production base to 750,000 tons by 2025 of recycled PET, growing the business to 25% of IVL's beverage PET portfolio in the west and achieving 12% to 14% ROCE to ensure investments are value accretive to our stakeholders. We strongly believe that IVL is well positioned to win in recycling and for a couple of reasons. First and foremost, IVL's global market share in virgin PET is a big advantage. Number one, it gives us an extensive local and global footprint and distribution in many markets. Number two, the relationship of trust with the largest beverage producers in the world. So IVL will leverage on these relationships to serve both their virgin and rPET needs. We have further reinforced this advantage in 3 areas, as you see on the bottom. Number three, we've acquired proprietary knowledge on mechanical recycling through our Wellman assets, which we've been running since 2011. Number four, we created partnerships with innovative players to develop the test -- to develop and test the next generation of chemical recycling. And number five, we are proactively building the circular ecosystem for PET across technology owners, packaging peers, converters, beverage companies and waste management. Moving on to our specific targets. As mentioned earlier, our target is to increase capacity to 750,000 tons with a 12% to 14% ROCE by 2025. This expansion will focus on the Americas and Europe, which will constitute over 80% of our recycling capacity. And the reason for that is because most of the global rPET demand and legislation occurs in developed markets, and we aim to be close to our customers in those countries. At the same time, IVL is committed to play our part along the entire value chain, including pushing for better product design, increased consumer awareness and higher collection and recycling rates. Across all these efforts, our goal is to ensure that these investments are also value accretive to our investors, and we will set our hurdle rates accordingly. In summary, given the current shift towards recycling and IVL's current positioning, I strongly believe IVL is best positioned to build a leading, differentiated and economically attractive recycling business. So just to recap on the 4 messages for recycling: rPET, recycled PET, is a new growth engine given PET's position in the market today and given its properties, 100% recyclability; number two, IVL has a clear strategy to build mechanical and chemical recycling capacities to maintain our #1 position; number three, to have a competitive advantage in rPET, driven by global footprint, recycling expertise, recycling know-how and strong partnerships across the value chain; number four, expanding our recycling capability to hit 750,000 T by 2025 whilst achieving 12% to 14% ROCE. Thank you. [Break]

To start the session, and I would to request Mr. D.K. Agarwal to take us through the integrated oxides and derivatives business.

Thank you. Well, after integrated or Combined PET, now I will cover the integrated oxide. As you know, IVL has been a growth company. And it's very important to create a new vertical, which can -- okay. Good? So we can start. IVL is a growth company. It's very important that after having a successful journey of integrated PET or combined PET business, we need to look for another vertical, which gives the growth to the company. And this was the integrated oxide. And I'll walk you through this, how the journey happened. We went into United States in 2012 when the shale gas started coming in. We bought that time one of the largest acquisition in United States for $795 million, glycol and purified EO business. We studied the business in detail. We said purified EO contributes 40%. And just for you to understand that purified EO, we are the largest player in the United States, and it is sell on a fixed margin basis and which keeps improving because you cannot transport this. And this has been a very steady business for us. Then we said, "How do we go upstream further?" We took the cracker, the Louisiana cracker. I know you are not happy with the delay in the start of the cracker, but I'm very pleased to inform that after initial hurdles, we have started that cracker. And today, it's operating nearly at full capacity, and this will start adding to the bottom line from February onwards because January -- until January 23, we are going to capitalize it, and the second quarter will have full benefit of that. So that was an integration from ethane to glyco, ethane to purified EO, we have a swap agreement, where physically they are located at 2 different places, but ethylene is swapped. When we looked at how to grow this vertical, the shale gas was there. Many crackers were getting built. We didn't want to get into the polymer business because, as you know, we were in the PET business. We look at this acquisition opportunity of Spindletop, which had a diversified product portfolio. This is from a cracker, a glycol plant, purified EO, propylene oxide, MTBE, surfactants, ethanolamines, linear alkyl benzene. And this was a great acquisition. The replacement cost of this asset today is in excess of $4.5 billion. We bought them for $1.82 billion. This has been the history for IVL. This, again, challenges us, our management capability to integrate these assets into our portfolio. And I'm very happy when I spent a few days in Houston, the amount of energy with the people they had will be able to very successfully integrate these assets. So as you can see in this slide, we will become the second largest with 1 million tons of EO. And if you take the pro forma LTM with the 95 from -- coming from glycol and 360 from Spindletop, the LTM gives an EBITDA of $450 million, which this contributes nearly 30% of the total IVL EBITDA. On the right-hand side, it's very important to see the graph where it shows breakup of HVA and derivatives, ethylene glycol and MTBE. Then out of $455 million, $147 million is contributed by glycol and MTBE. The balance $307 million is HVA. And what does HVA means? High value-added products with fixed margin. This means the earning from this business, if the raw material goes up, gets passed on. The only volatile portion is MTBE and glycol, and it's not bad to be in a volatile business. Volatile business makes money. You saw in glycol in 2018, in spite of not having the cracker, we made in excess of $200 million because glycol wasn't peak. And as we start MTBE, the first quarter, we have a turnaround of MTBE. But second quarter, 12 March, the plant will start, we have reviewed the start-up of the plant and is on track. So second quarter onwards, MTBE will start showing very strong cash flow. So this is a perfect hedge between HVA and volatility of the business, and that's what we wanted to show here. Now let's look into cost curve. It's very, very important. Shale gas is -- they're going to stay here. You see the earlier cheapest producer in the world of ethylene used to be Middle East because Middle East gas price was $0.75/MBtu and went up to $1.25/MBtu, but middle East does not have any more gas. They are -- the crackers are now mixed feed cracks. So that's what you're seeing with Middle East, is limited availability. Then you have the U.S. gas. This is based on certain gas price today. Gas price in America has already come below $2/MBtu. This is when ethane has become very cheap. Still, so you can see what is the cost competitiveness in the left-hand slide that in terms of ethylene, we have $400 advantage versus naphtha-based ethylene. Naphtha-based ethylene, today, you cover most of the olefin producers, are working at below cash cost today. I mean as the cycle went up, they went down. So we have inherent advantage of $400 per ton in terms of ethylene. When you translate in terms of glycol, it becomes $200 because you consume about 0.5 to 0.6, so this investment has a competitive advantage versus naphtha gas crackers. The question arises, will naphtha crackers continue to run below cash cost for a longer period of time? The answer is no because the reinvestment slows. Particularly in any petrochemical, this is what happens. You have investments, margin goes down, investments slows down, and then you have the margin coming up back. And I'm sure as the world -- I was telling you polyethylene world demand is 180, and I was saying a very interesting slide, the total plastics in the world is about $350 million, and more recycling content will come where PET will get a better sign. The right-hand side gives you the PO/MTBE technology. This is very, very important. How do we make propylene oxide and MTBE here? We make from isobutane and methanol. Both isobutane and methanol are linked to the gas. And methanol prices have -- as you go and see the balance sheet of Methanex, you will have a good idea of what is the methanol cost curve in the U.S. So this PO/MTBE, here the MTBE's byproduct, and this is highly cost competitive. Even LyondellBasell had PO -- starting monomer technology and PO/MTBE technology, they went for PO/MTBE technology. The other direct oxidation technology, which is H2O2 hydrogen peroxide technology, that's inexpensive. So we have an inherent advantage in this PO/MTBE technology, as you can see, obviously, from this cost curve. So we will be beneficiary of both the technologies. We -- I want to remind here, we own this technology, and we'll be able to license this technology globally, except one province in China. So it's a very interesting business. Now coming to this slide, we've chalked out a 5-year strategy, what we are going to do. Vision is important, to be a leading downstream producer in a high-growth market, leveraging low-cost feedstock. You're going to create more value-added products leveraging on low feedstock. Our first job is, which is nearly completed, is to be cracker, run the cracker on a stabilized operation, about 450,000 tons, integrate our Spindletop. As I mentioned, we bought this PO/MTBE business, the other surfactant business. We are very confident of integrating this. We are getting a lot of talent with this, and this talent has started working on immediately. You know that glycol plant used to have unscheduled turnarounds, and we are going to make sure that those technical competence helps us to run those assets harder. So the 3 strategic priorities, as I said, IVOL, Lake Charles start-up, which is already operating at full capacity, integration of Spindletop assets. At the same time, as you can see, that we are also going to deploy some of our technical capabilities, as I mentioned, for running these assets. Another important thing, which has come with this, is that we have surfactants, as Mr. Lohia was mentioning, high value-added surfactants. We are going to unlock this value. Actually, Huntsman, before they sold the business, they had this project already, but they could not give a capital allocation to this. And actually in their management presentation, they showed EBITDA of $80 million with investment of only $160 million. We have been very conservative. And why we're able to do this specialty surfactant project, because you have purified ethylene oxide and propylene oxide both at the same site. So you are able to leverage this, and all this together gives us the capability to make this specialty surfactant project, which we call Prosperity. We will keep briefed as we go further in this business, and this is targeted to start in 2022. So the strategy is to create value-added products from a cheap feedstock, capturing the whole value. This is a manufacturing footprint. If you see on the left-hand side, you have the IVOG project, which is the EO/EG project. Below that is Lake Charles, which is the cracker. And what we have added here is 6 -- 5 verticals, as you can see. Port Neches is the biggest site. It is a large site, which has a lot of capability to go further upstream or downstream. We are a large producer of polypropylene. We can put a PPH plant there to go upstream. We can further go downstream. As you know, propylene oxide goes into polyols. Polyols goes into polyurethane. Polyurethane is 4.5% to 5% growth rate in the polyurethane business. So we can unlock a lot of value. Chocolate Bayou, Texas is basically LAB manufacturing facility and -- a benzene facility. Then we have Dayton, which is specialty surfactant, which will be leveraged to make our specialty -- Prosperity project in Port Neches. And India. India is a very, very large market. We have this facility in Ankleshwar, which also can be debottlenecked and which can be making the specialty product. Similarly, Australia. Australia is not a growth market, but you will be surprised that Australia is the largest LPG exporter in the world, beating Qatar. So I didn't figure out how can they not unlock those values. So Australia is another area. And on top of it, we have the R&D technical services offered. As you can see, globally, we have many people coming over. We are in ag chemicals. We are in mining. We are in personal home care. So there are a lot of diversified product portfolio, which we'll have in this business. So it's a fantastic business domain. We talked about cost Olympus. Cost is very important, as we mentioned. We have still not deep dived into those businesses yet, but I can tell you that this $45 million is very, very conservative. $30 million, we are talking of operational consolidation. Actually, $20 million has been already unlocked. How? $10 million contractors -- already, they had given us in management presentation. Contractors has been reduced, number of contractors. And as we took over the business, 52 people retired from the business. And that was the easy fix for us to realign and to relook at the consolidation, so $20 million will get unlocked within 2020. The $15 million is through operational excellence, more specifically the ethylene yield improvement. The Port Neches has a capability to modify their technology, which we call CO2 Recovery project. And in addition to this, as I said, that we have 6 R&D centers, a facility of customized formulation in Dayton and strong IP comprising of more than 200 active patents. So this saving of $45 million, $20 million is already unlocked, as we deep dive into this business, we will further look at -- and I have a great team, believe me. They are all excited. The most disappointing part, which I heard from them, that Huntsman was not treating them as a core business, which was very surprising for me. But anyway, so this is a very, very interesting acquisition, which captures the whole value chain. This is very important to understand that one, how do you unlock the value by product portfolio. As you can see here that glycol gives the lowest margin. Actually, glycol is the lowest margin, but not necessarily 3 years down the line when the glycol becomes tighter. Then comes the purified EO, which is purified EO is basically, as I said, on fixed conversion margin, you sell it. So it's basically NTP plus certain [add-on]. Then you unlock ethanolamines, which is DEA, MEA, TEA. Our plant has possibility to swing between different molecules. And then you have propylene oxide which is, again, as I said, on a fixed convergent basis. The specialty surfactants actually unlocks a significant value, 3.1. So just let me explain a little bit here. We ship our purified EO far distance, and this is a hazardous material. So there's a lot of transportation cost to move the material to New Jersey, Chicago area or west coast of United States. So we are going to bring those customers at our site, so this transportation cost is eliminated, and we leverage on our purified EO and propylene oxide. So I'm very excited about this project, which will also unlock a lot of value for us, and we'll keep you briefed. There are many other downstream adjacent opportunities, as I mentioned, including polyurethane, which is growing more than -- we don't have any noncompete clauses on polyurethane. So when you have raw materials, you actually can be beneficiary of downstream. It's that -- if you depend on purchase raw material in a capital intensive, you become unrivaled. So what it's going to translate, you must be thinking, 2.2 million tons of volume. By 2023, again, 2.5 million. We haven't talked to you here anything, new project or anything here. We are just actually are going to unlock the values by running those assets harder, except for the specialty project, which is the Prosperity. The EBITDA will move from $455 million to $700 million. And as you can see, this is the bridge from $230 million. And that's what I mentioned to you, that in 2018, we made very good money because of glycol. Now that had a hit of $90 million on glycol because of the lower MEG spread, and then we are taking $45 million from the cost synergy, which I just explained to you; and projects, which is IVOL, which is already starting. It's going to churn $80 million, $90 million on today's crack margin, which is $0.14 to $0.15. And the crack margins of $0.14 to $0.15 does not give replacement return. It costs $2,500 per ton to build a cracker in America. So you need at least $0.25 to $0.26 to create that return on replacement. So all these people, you have heard about Sasol overrun and all that, so all these crackers are getting built now and there's no more -- there will be a slowdown in the addition of the capacity. So that's what is going to happen, and the Spindletop. I just remind here that first quarter of 2020, we are having MTBE shutdown, that's why you will not have the MTBE earning in the first quarter. But second quarter, we'll have the impact of MTBE and MTBE C factor, what we call it. As you know, the MTBE is very, very strong in the United States, is running at $480 per ton, a very, very strong margin for MTBE. So our -- this considers only $0.92 a gallon, which is about $320. So if the present remains then, that will help us in the 2020 earnings. So what it finally adds up? This is a very significant business for us. ROCE, very critical. So this will be a 13% return on capital employed. So I said, cash cow, which is Integrated PET business, and we are going to make this also another cash cow, so that you will have those 2 business verticals, which will be the strong verticals for our business. So to conclude, what we need to do. A great opportunity. We have diversified. We have created an integrated IOD business, oxide business, which we call it, leveraging on low-cost feedstock. The cracker has started. We have structural cost advantage as compared to naphtha-based crackers, as you all have studied this very detail. We will be going into downstream project with the Prosperity. We will announce -- we'll keep you updated in the quarterly calls. And we will be very focused in our cost saving, which presently we are talking of $45 million, and we'll keep looking at it how we can enhance those cost savings. And there is a lot of opportunity. This was a silo management, which we collapsed into a single CEO, and the CEO of the company has -- will be the person who we hired. So that's again, a challenge for us on how we culturally integrated this acquired assets, and I have no doubt, we'll be able to do it successfully. Thank you very much for your time. Thank you.

Good afternoon, ladies and gentlemen. Let's talk about fibers, which is a bit more touchy-feely business. And I must say that fiber business has been growing in the downstream, and we are moving more towards near to the customer, as now for the last 1 year -- over 1 year, we have become the first tier 1 to the tire brands. And we are also now Tier 1 for the baby diaper brands like Kimberly-Clark, P&G, others, whereas in airbag, we are Tier 2 supplier. Let me just refresh you with the relevance of Fibers business for IVL. We contribute 15% of the IVL's EBITDA and about $244 million in terms of money and $3 billion plus in terms of revenues. In the past couple of years, we have been investing at a higher rate, while the returns from our investments, particularly very, very strategic investments to complete our strategy in the tire cord industry and in the hygiene, our ROCE and margins got temporarily depressed for which we have solid plans to bring it to double-digit EBITDA, which I'll explain going forward. So now to share with you our business model and the strategy. IVL Fiber business, which was when we got listed in 2010, we were 2 sites and 1 country, and we've grown to now 50 sites and 19 countries, spanning into -- very heavily into automotive, hygiene and lifestyle verticals. As you see those rings there, we are very heavy in hygiene in the North American business. And whereas in Europe, we have significant share in hygiene as well as automotive. And Asia, we are focusing more on the Lifestyle segment. And the kind of offerings which we do now is airbags, seatbelts, tire reinforcements, baby diapers, adult incontinence and other clothing, fire retardant fabrics & home, et cetera. So this -- these are the new areas where we have grown in the last few years. If I share with you the Fiber business strategy, which we developed during 2010, immediately after our listing. We decided as a company that we will not follow the Asian model, per se the China model, that you produce in Asia, try to be low-cost and ship it to the world. We decided to go and invest in the consumption centers and near our customers, and we ended up acquiring some of the most valuable companies in Europe, in the United States, where -- who had the pride in their offerings and who had very strong IP and very close relationship with the customers. And that's where we figured out that the -- these new offerings can be brought back to Asia. If I look back into the 2010 strategy, which we developed, I feel very comfortable, and I feel very satisfied that this has made a difference for IVL. And we can differentiate ourselves from our peers and competition. So this was more focusing on HVA, going acquiring the IP and the customer intimacies in the west and bring it to Asia in the emerging markets. But that doesn't mean that we were purely focusing on that side. Our business model balances our portfolio by also investing in the low-cost commodity business, which is lifestyles. And we chose strategically to invest in Indonesia and in India, which together, make -- the population of India and Indonesia is 30% more than China, together, and because the per capita consumption in these countries is 1/4 of China. And we see a huge potential in the Lifestyle business as we are -- we have located our businesses in India and Indonesia, which is one of the lowest cost operations in the world for commodity. I always say, commodity is not a crime as long as you are making it at the lowest cost. So we see that we can repeat China in Indonesia and India going forward. And therefore, we have reorganized last year ourselves into 3 distinct customer-facing application driver verticals. The objective is to reduce the complexity of managing 50 sites in 19 countries as one operation. And instead, make focused teams who are highly empowered to run these businesses, as each of them about $1 billion, as independent SBUs and also work very closely with our customers to create new IP. I believe that this strategy of reorganizing ourselves is going to really unlock a lot of synergy in this vertical, which will be cost-driven. And that's all I'll share for -- going forward, that we will unlock more value from synergies from cost transformation and from new projects and the new products applications going forward to come to double-digit ROCE levels. So each vertical has a very strong growth drivers. We all know that the Mobility segment -- if we look at cars, cars are linked to GDP. All of us know. Automobile business goes up and down with the economy whereas IVL has chosen very carefully 2 major segments in the mobility. One of them is tires. The tire, of course, is linked to the automobile production, but 75% of the tires are replacement tires. Today, about 90 million cars are produced every year. Against that, there are 1.4 billion cars on the road. So we serve the 1.4 billion cars on the road, that's where the 75% of the tire -- replacement tires exist. Similarly, we chose airbag. Airbag, of course, goes into OEM, but the number of airbags are growing every year per car. It used to be one airbag, now 2, 4, and some of the advanced cars, we have up to 14 airbags. So this is a very high growth segment and has very high barriers to entry as the approval periods for airbag is about 5 years and for tire cord is about 3 to 4 years. Then coming to Hygiene. Hygiene is another vertical, which is driven by population, of course. But within that, there is a demographic trend that supports it, and the protection and other things really leverage this business. We have about 85 million new babies born every year. And that is like a size of a few countries if you look at it, bigger than Thailand, of course. And this -- an addition to this is about 20 million -- 20 million to 25 million adults are hitting the age of 60-plus every year. And all this is leading -- that's why we are investing in this segment to cater to the baby segment, fem care segment and adult incontinence. And adult incontinence is a new high growth business in the advanced markets, in the developed markets, where babies are in the emerging markets. And adult incontinence diapers go for many years once you start, and the size of these diapers are very large. So this is a new area where one of our companies, our goal is having a good market share. Then the medical applications around hygiene are becoming very important as we can see by the day that there are demand for protection and against bacteria, infections, et cetera. Coming to Lifestyle. I mentioned earlier that Lifestyle is driven by -- mainly driven by the cost position, which we do have in Indonesia and India. And we have huge potential in this segment. And what we are doing in Lifestyle segment is focusing more on recycled products and also on sustainable products like we have introduced in Germany and in Thailand. We have converted full IPI Rayong site, which is about nearly 180,000 tons into antimony-free. We call it heavy metal-free fiber, which is preferred for skin protection and particularly goes for intimate wear and baby diapers and the rest. So -- and the new materials like PLA, et cetera, we are moving very rapidly through innovation to gain market share in this segment. We can see below that nearly $120 [ million ] is the pool. In this business, we are currently about $3 billion. There's a huge upside in this business as we grow forward. Just to share with you how do we select our niches. The yellow portion is talking about adult incontinence, baby diapers, medical hygiene, airbags, tire cord, auto interiors, industrial. So this yellow portion you see is the main niches where we are present. And if you go to the traditional apparel, which is green, is when I mentioned about India story and Indonesia. That's where we continue to focus so that we rebalance our portfolio by absorbing the fixed costs and other overheads through the large commodity segments, and we make more money in the high-value segments. This is just to share with you, number one, we are present in all polymers. We believe that no single polymer can deliver all the functionalities. So we are in polyester, nylon, aramid, PP/PE, acrylic rayon, PLA and composites. There's no other country in the world -- company in the world, no other company in fibers who has this kind of range. And then the green portion with the dark blue line is where we are today. And when you see the green and the dotted lines, that's where we see the adjacencies where we can expand going forward. And we do see potential in industrial, medical and composites. That is where IVL is targeting to find solutions for the world's big problems. The world's big problems like clean water, clean air, that's a way of focusing on fibers built for filtration. Similarly, medical gowns, disposables is another big problem we are trying to solve along with our customers. In the composite side, we find that the biggest problem with the automotive industry, particularly, and the aerospace industry is lightweighting. Lightweighting, good performance. You just can't lightweight without delivering performance because most of these automotive applications are where the human lives are at stake. The performance is to be the first priority than anything else. We have commercialized composites, which are glass and nylon composites, that replace carbon fiber and steel. And it has the 75% strength of carbon fiber at a very, very nominal cost going forward. So we have been able to commercialize this product into automobile industry, and we already have the approvals, and we are starting getting commercial orders on this. We have established the road map to double our EBITDA, as I mentioned earlier. And two, as I mentioned before, that this is pure focus on finding -- our mission is to find sustainable solutions for our customers and our society. And we aspire to double our EBITDA and double our -- and double-digit ROCE by focusing 65% on the HVA products and about 30%, 35% on the commodity applications. The way, the road map to do it is we do have a huge headroom in our assets for capacity -- increasing capacity utilization. So most of this money, which we are targeting, is going to come from the capacity utilization, and it will come from organic growth and also the mix improvement besides the cost transformation, which will be nearly $130 million going forward under project Olympus. We have established clear matrices to measure operational excellence, capital efficiency, innovation and commercial participation with the customers' collaborations, et cetera. Just to explain it more on -- we have 2 levers for our profit model. One lever is cost transformation, operational excellence. And the second lever is innovation. On the cost transformation, we have established about cost efficiency in assets about $90 million and another $40 million from consolidation of these 3 verticals. As I mentioned in the beginning that even -- the real synergy benefits of cost reduction will come out of this collaboration -- consolidation and reorganizing ourselves. This is one lever, which will add to our profit margins and also one step towards higher double-digit ROCEs. The second lever in the business is innovation, which Fiber business is very intensely following up and collaborating with our customers. 21% of Fiber business revenues come from the product commercialized in the last 5 years. This is our metrics for measuring our innovation. I can go on and on with various innovation initiatives, but I'm only sharing with you the ones which have been recently awarded and recognized by the industry. AVK Innovation Award for our composites, which I just mentioned about the car seats and other steel replacement in the automobiles. This is towards lightweighting the automobiles. When you lightweight automobile, we help in the sustainability because it reduces carbon emissions. The second award, which we got -- Trevira has a very, very recognizable brand called Trevira CS, which serves the hotels, the cruise ships for fire retardant fabrics. We have now taken it out of the interiors into the exteriors for -- by making it UV resistance and fire retardant, and we were awarded recently, 2019, the branding (sic) [ Brandenburg ] Innovation Award for Plastics and Chemistry. The -- on the Lifestyle side, I mentioned earlier that we got the antimony-free, heavy metal-free fiber. We got it in the 3 sites now: Auriga, Trevira Germany and IPI Rayong. This is an area where we find that we are going to go really heavy into the skincare and into intimate apparel and working with brands who have started recognizing that this is a need because skin is the largest organ of our body, and we are really investing on how can we do better tools for skincare and protection. Now coming to the summary slide, how all these things will shape up into a double-digit ROCE and a double EBITDA. Mainly, volume is going to drive, which is our natural upside, which exists in assets. We have relatively low operating rates, particularly in India and in automobile and in the Mobility segment, where we have solid plans and we have contracts with the customers that we will be able to ramp up our volumes as we go along because there were certain stressed assets which are under restructuring. So that volume is going to give organic growth. That's where the money, we believe, will come without a huge CapEx going forward. The second is the cash -- the cost transformation which is about $130 million, I mentioned. And the working capital reduction of about $100 million going forward. So all these things put together, we believe, will give us double-digit ROCE. And we have a full tracker for -- by [side] by site and by -- also responsibility person-wise to track it going forward by month-by-month and quarter-by-quarter. And I'm very confident that Fiber business has a huge upside, and it will reach its full potential by -- in the coming years and deliver these results and become a significant contributor to IVL. Thank you. And these are the focus areas, which I've already mentioned, and mainly synergies coming out of the reorganization, project Olympus and also going after the new demand coming from the demographic and other demand drivers, which I mentioned. Thank you very much.

Good morning. Yes, still morning. Mr. Lohia has identified leadership development as one of the 5 strategic priority for the group in the next few years. And why? Because the quality of leaders is fundamental for a company like IVL for its global reach and size, for its ambitions and for its sustainability of success. That's why leadership development is my most important priority as Head of HR. And the way we are addressing it is through 3 fundamental pillars. The first one is how we structure our leadership team and its succession. The second one is how we manage their performance towards the goals and objectives of the company. And the third one is how we develop the leaders per se. And then we're going to bring you through briefly on all these 3 aspects. What you see here are the 53 most important leaders we have in the company. These leaders hone impressive knowledge and experience about our industry, our customers and the way we operate our business successfully. That's why we have structured them into 2 very important bodies. The first one is called Indorama Management Council, which is the Group CEO and the immediate reporting and direct collaborators to him. And the other one is called Indorama Business Council, which simplistically, you can imagine the level below. Now these 2 groups, their main responsibility when part of debt bodies, is to discuss and deliberate on future opportunities and challenges for our company. In a way, on top of managing the day-to-day business in their own operations is collectively discuss how to bring IVL Group into the future. But obviously, this is not enough. The IVL Group is really, really large, and thinking about the future, we know that there will be exchange in these people, people will move to different jobs, someone of them will retire. So we need to guarantee to ensure the next generations of leaders. And that's why we have, in 2019, make the first professional loop of what we call a succession planning process. And through that process, we have already identified 63 successors for the IBC Group, the people that you see on the right. And that for me has been a great success because we are identifying what is the next immediate generations. We are preparing them to take over. And during the next couple of years, starting now, we will go down one level, creating the full pipeline from the bottom to the top. The second pillar that you remember is actually what we call performance management. Why it is important? Because as some of my colleagues mentioned, IVL operates in an array of countries, geographies, very different product portfolio. So we need to make sure that considering we have one common strategy for everything we operate globally, we need to make sure that these top leaders have coordinated efforts and actions. And all these actions in the fore, they need to be aligned towards a common direction. And in doing this, the performance management process play a major role because what we have done, we have started cascading from the vision and mission of the company into the objectives for our group CEOs into the objectives the IMC group and to IBC. So now everybody is, in a way, linked their own objectives to the overall goals of the group. And not only, we, obviously, as you can imagine, also the compensation of the top leaders, it needs to be linked in a coordinated manner to this -- to the achievements of these goals. And in 2019, we have launched both this system that encompass the 53 individuals that you have seen before. And in 2020, we will go one level down. I think even more, all the leaders in the company in one common way of setting goals, measuring them -- measuring performance and compensating them. The third pillar is the leadership development per se. And here, what we have done in 2019 is, first of all, identifying which are the characteristics of the IVL leaders we need to bring IVL where we want to be in 5 years from now, in a way to set what we have called the IVL brand of leadership. And every time, developing leaders, we need to understand to develop towards what, which are those characteristics? We have defined those with a very sound process, thinking about what -- where IVL needs to be 5 years from now. And we have defined 9 characteristics that you can see in this slide. Cluster into 3 groups: drive results, energize others and champion change. These are the 3 fundamental things that our leaders need to be doing and very well in the future in order to bring IVL where we want to be in 5 years from now. And then we have prepared, according to these characteristics, an array of initiative, starting from training, but also internal and external coaching, internal mentoring and a program job rotations that we'll touch over the next 4 years, but starting now, all the 300 top executives we have in the company and middle management and the 2,500 junior leaders we have. We cannot focus all on top leaders. We need to touch all the leaders at all levels in the company simultaneously. This is a very important program. As I said, it will span over 4 years, but the most important part, we will do this year. And as you can imagine, it is a very important investment in terms of time and resources for the company. But we believe that those things will create sustainability in the success of the company going forward. So my time, it's at the end. And I -- in this slide, you see the summary of what we say, you have in your material. So if you want at a glance page where we can see what are the priorities for HR, you can see that page. And with that, I ask our CFO, Mr. Sanjay, to continue our -- to our next session. Thanks a lot.

Thank you, Roberto. Good afternoon, everyone. Let me start with the title here, which is the balance sheet strength. Our balance sheet remains healthy, and we continue to have strong operating cash flows. We had our annual TRIS review in 2019 post Spindletop acquisition. TRIS has appreciated our business profile -- strength in business profile, which this acquisition brings, at the same time acknowledging that there would be a temporary phase for higher leverage. And we were reaffirmed our then rating AA- with a stable outlook. I have 4 key messages here. The Olympus program, which we are all very excited about, will yield cost savings of $350 million, and that will, of course, directly impact our bottom line. IVL will continue to register healthy operating cash flows throughout the cycle driven by strong EBITDAs as well as disciplined working capital management. Third, our gearing ratio remains well below the debt covenant thresholds. We will focus on deleveraging post this acquisition, and there would be positive free cash flows, which I would say that we had been free cash flows in 2019 also. One of the very important sources of growth capital is debt. We have a healthy debt profile with diversified sources of debt across currency exposures and financial products. Now let me go through these 4 messages in detail. This slide has come before also. As Deepak mentioned, we have launched into this cost transformation program, which encompasses both corporate-led initiatives as well as business-led initiatives. The corporate-wide initiatives would yield a total cost savings of $90 million to $100 million whereas the segment's operational excellence programs will deliver around $240 million to $270 million savings. We have a proper infrastructure, as Deepak had shown. We have the IMC structure, which would be monitoring, and our finance team would also be closely working with business segments to ensure that we have the success of this Olympus project. And as Deepak also mentioned, I'm myself leading the middle vertical here, which is the global business solutions as well as the finance transformation program. Moving over to the second message, which is the operating cash flows. We are confident that IVL will continue to register healthy operating cash flows throughout the cycle because of the strong EBITDA we generate as our sales reaches unparalleled as well as driven by the disciplined working capital management and supply chain solutions. In third quarter '19, we -- year-on-year, we did report that we improved the working capital cycle days by 3 days, resulting in $120 million inflow. And over the last 5 years, we've had our EBITDA to OCF conversion at around 93%. Can we do better? We have benchmarked ourselves. Our consultants have benchmarked us in the chemical industry. We are in the first quartile, but there is still room to go to achieve the best practices. So going forward, we will proactively monitor inventory levels and roll out supply chain financing initiatives across all segments. And our target for 2020 is to reduce 5 working days, which would bring in around $150 million release of working capital. Continuing with the second message. This healthy cash flow has enabled us to reinvest [time] in our business, and we were able to commit to Spindletop because of these strong operating cash flows. At the same time, we have consistently paid our dividends during the cycles, and we will continue with our policy of minimum payout of 30%. Moving over to the third message, which is the strong cash flow, which will support the deleveraging efforts. Over the period -- I'm sorry. Sorry. So this is on the gearing. Our gearing still remains healthy. We have sufficient debt headroom. As of January, post this acquisition of Spindletop, our net debt-to-equity would be at 1.4. This is well below our covenants, which is 2, and the internal threshold, which is 1.5. Our targets over the long-term cycle is 1:1, and that is what we believe should come back in the next year or 2. So as shown in the opening section, our debt service coverage ratio is at 1.6, and this should be at 2 in 2020 and only improves from there. This is driven by IVL's healthy cash flow generation that'll not only fund new maintenance and growth CapEx, but also support the deleveraging post-2020 and cover debt payment obligations. This graph illustrates how IVL is able to deleverage and return to our previous levels of gearing by 2023. Over the period 2020 to '23, we expect EBITDAs of around $7 billion to $8 billion. Over the next 4 years, it is projected to generate $4 billion to $5 billion free cash flows before strategic investment, and this is after the maintenance CapEx, working capital and dividends. We are confident that -- we are confident in our ability to lower the gearing ratio while funding our current CapEx plan. Our stakeholders, our shareholders have been very supportive of this growth, and we would like to thank our shareholders who have, in fact -- we were able to get the warrant exercise at 95% in 2016 and '17. So they have been a part of this journey, believing well in our business model. What does the diversity in financing means? As I said, growth capital requires debt. It's a very important form. And we have been able to achieve a lot of diversity in our debt profile. Over the years, we have raised Thai bond debentures. We have been able to raise debentures in the other markets as well as we were able to raise the U.S. dollar debenture in the biggest market, $300 million in 2019. We were able to refinance our perp at a coupon of less -- 200 basis points less than what it was earlier. We see here a little bit of increase here in the pricing. That's because emerging markets were added into our portfolio, which was India, Brazil. And in the left, you see another form of diversity where we raised green loans from Mizuho, EUR 200 million as well as $200 million in -- the EUR 200 million and USD 200 million. We've also -- as you know, we've made this acquisition, Spindletop, which was around the $2 billion. And this $2 billion was raised from our relationship banks. We did not get into any refinancing through bridge loans. We just did a 5-year acquisition loan and we're able to get it at a competitive rate. Maturities are well balanced, and that's why the debt-to-equity ratio, DSCR is around 2 whereas our covenants are at 1.1. That ends my presentation. I'll request Mr. Lohia to come and give the last message.

Therefore, just before the Q&A session, I'd like to recap on what we have shown you and discussed in this morning's session. So I would like to thank Sanjay, and I'd like to thank the IVL management team for making their presentations and sharing with you our expectations. To recap our mission, we have many challenges, and we have our key focus areas into 2020 and beyond. The outlook is challenging, but IVL remains well positioned for growth. Our challenges -- 3 challenges are primarily the low point of the chemical cycle that we are in. IVL is a top-tier cost position, and that will ensure that IVL outlasts its peers. And reinforced with the Olympus cost program, we believe we'll be even stronger in this period. Our next challenge lies in the recent risks to the global economy, the trade risks and from the recent coronavirus issue. IVL's geographic presence helps us to be quite well positioned in face of these 2 challenges of trade issues as well as the coronavirus. We have a focused portfolio of Packaging, Lifestyle, Hygiene and Safety, which are all FMCG-driven products. And we serve our customers and [ reassuring. ] Therefore, we have a stable business of constant relevance of our products to our consumers. The new challenge that we have seen in the last couple of years comes from the growing concerns on the topic of sustainability and waste. IVL is going double down on this and seeing this as a great opportunity for IVL and has the ambition to be the leading rPET producer globally. Temporary challenge would be the acquisition of Spindletop, our largest ever acquisition, roughly of $2 billion. But as you can believe, you have seen IVL, over the last 10 years especially, but IVL has been growing for the last 25 years. And the strong management teams that we have that Roberto talked about and the strong management team that we are getting with Spindletop. One of the investment criteria for Spindletop were the people as always for every acquisition we have made in the past. We have bought a business, not only for the products that it manufactures, but for the teams that come with it. That's a big BD item for us. And as D.K. alluded to, our Integrated Oxides and Derivatives business is now being led by Alastair Port, who is coming with Spindletop. So though we had a very good team in ethylene oxide and MEG business, we built a team in our cracker business, and now we have even better position with the 1,100-or-so people that are coming from the Spindletop acquisition. So I think IVL is very well positioned for the challenges. And therefore, moving on, coming back to the key slide, which becomes my display picture, is that these are, in short, our strategic priorities. We know our mission. Our vision has not changed. Our mission has not changed. Our value metrics have not changed. Our financial metrics have not changed. We are just better positioned now with our portfolio, with our teams, with our aspirations to deliver all of these within this period of 2023. To sum it all up, IVL's enduring approach are generating strong returns for our stakeholders through the ups and downs of the chemical cycle. We have a clear and well-articulated strategy, focusing on the 5 pillars of cost transformation, asset full potential, growth in adjacencies, our leadership in the recycling and the development of our people. The combined PET centers its cost position and drives a circle economy through the attention that we are getting in the plastics and the waste feat. Our Integrated Oxides and Derivatives business is now fully capturing all the elements that the business we sought encompasses. We are not in the polyolefin space. We didn't want to be in the polyolefin space. In the combined PET, we are not in the refinery space. We never wanted to be in the refinery space. So we are in the midstream businesses, and we're heading more towards the downstream businesses with the investments focused on surfactants, with the investment focused on recycling, with the investment focused on packaging. We continue -- let me cover Fiber before that. So Fiber, basically, as Mr. Gill mentioned, we have a very strong leadership. We have a global leadership. We have businesses, which are protected with intellectual property. We have this strong -- very, very strong strategic alliance with our customers. All the automotive companies in the world, they -- we deal with them. Yes. Last 12 months have been a tough time for the automotive space. But in the tire space, as you have been told in the past, 70% of the tires are replacement tires, only 30% comes from OEMs. So although the automobile business has been hit quite badly in the last 12 months, but our business has seen a mediocre impact of that. But nevertheless, we have a global footprint. As these high-value fibers migrate to the emerging world, we being an Asian company at heart, we have assets in the emerging markets. We have added assets in Asia, in India. You saw the transformation of Map Ta Phut site in the last 10 years from a bankrupt company to a thriving company. We similarly have aspirations for our joint venture in India. The Fiber business that we acquired roughly a year ago is still not delivering the desired results, but there was a lot of work to be done to understand what was stopping us from improving our results. Now within this last 9 months, we have identified what are the areas of weakness. And I have no doubt in the ability of my team that they will lead the Indorama India's business to the same glory as we have seen the Map Ta Phut business. And prior to Map Ta Phut, we did not put this as an example here. But remember, in '97 at the -- just under the crisis, the Tom Yum Goong crisis, we acquired Nakhon Pathom, another polyester company. Again, that polyester company was not operating. We started it up. Starting 2008, we started making money already in that business, and that business is where we are also housing our recycling in Asia. So we have done a lot of transformations at every site that we have acquired. It takes time for transformation, but believe in our team, believe in our potential that this Fiber business, which has a very ambitious target of doubling its EBITDA from roughly $250 million to $500 million within these 4 years without any new acquisitions in it. Thereby improving its ROCE from 3% to 15% is a very ambitious target by itself, but it wasn't built to please you because, ultimately, you will see it whether it happens or it doesn't happen. What is important is now with the new processes, the ERP, with the centralization of certain things, with the centralization on even how we are going to look at our technical prowess, how we are going to improve our manufacturing footprint, take out waste, bring in efficiencies, productivity, digitalized operations, all of them collectively would help us reduce our working capital, will help us reduce our capital employed, at the same time, improve the earning potential. So combined, basically, we will continue to deliver on very healthy operating cash flows and which will lead to deleveraging the balance sheet. We don't have that sort of huge aspiration currently in this 4-year period to add volume. I mean we are adding volumes of -- from 12 million tons to 17 million tons, which is based already on all the committed CapEx that we have. So we have a lot of volume coming onstream. We are growing. We are continuing to enhance our quality of earnings. And with a stronger balance sheet, beyond 2023, we'll again have a lot of potential to grow into further high value-added items and earnings coming at above average to our peers. Most importantly, everything that IVL has done over the last 25 years is because of its people. These are the people who have acquired assets with the proper [ DD, ] integrated these assets, operated these assets productively, managed the stakeholders, managed our -- a key stakeholder being also the lenders to our group who remains their trust and believing in the potential of IVL and its people. It is sound easy, but getting a $2 billion investment approved in this cycle and getting it financed, not on a bridge basis, but already on a project basis is a big feat. I think Sanjay Ahuja gets limited tension from me. But if I would say the best thing he's delivered to the group in this year is that he did not take a bridge on the Spindletop acquisition, but he used a 3 months towards closing to get it fully funded at appropriate levels. So our people remain the most important asset that this company has. We just have to continue to learn -- be a learning organization, which we intend to. And Roberto is helping us towards that end, so is Deepak, Dr. Deepak, helping us. They bring a lot of global knowledge, which is fresh -- freshness. Hopefully, you would see in our presentations today, there's a lot of freshness. It's quite different from what you have been told in the past. There's a lot more details. But there's a certain level of details that we can only share with you, we would act with you, we will deal -- we will look towards your Q&A, and we'll help you understand your business models better. But believe me, a lot has gone into developing this business model. So together with that, I just want to thank you all for being here today. And I can only commit to you that there's a very healthy IVL today and tomorrow. Thank you. So we are getting all our IMC members on the stage now for the Q&A session. If anybody needs a bio break, this is a good time that we set up. It may just take a minute or two. How do we do on time? Vikash, are we serving lunch after this or not?

Yes.

So please, [for person invite], please stay back and lunch. We can continue to discuss even post the Q&A session. So I'm going to continue to stand here. Go ahead.

Okay. Should we start? Who's going to kick it off? Yes, Mark, please.

[indiscernible]

Is your mic working? It would be nice if the mic is working, then you can -- everybody can hear you.

Based on your recent interactions with both investors and analysts, sell-side, buy-side analysts, what do you feel is the biggest variant perception between what they may be focusing on? Are there expectations versus what maybe you'd like to emphasize or clarify?

Were you one of the guys we interviewed for this? What we have done in the last 3 months is we went out and interviewed through a third-party on a no-name basis on what are we doing right and what are we not doing right. What -- the consistent feedback we got was that we put a lot of spin to our business. And people who understand spin understand that a spin means we are always talking positive and we never bring out what could be our challenges. So that is what we are trying to correct in this presentation. We are trying to lay it out to you as it is. Even in our 2023 plan, as you would see, we are not taking margins as a way to protect ourselves or to demonstrate to you. Remember, we had a -- we fell on our faces in 2019, starting with the $1.75 billion target of EBITDA. And then, I'm not at liberty to disclose the full EBITDA, but as you know, the full EBITDA would be lower than the quarter 3 ATM EBITDA of $1.3 billion, which is very sad. It is not that we were trying to put a spin, it is just that we thought we were sharing with you what are -- what we thought was the likely output. And that's why I said in the beginning -- very beginning of my statement that we started 2018, and we over-delivered on '18 unexpectedly. Otherwise, you would have said so. And then in '19, we overestimated what we should be getting, and we underdelivered. Where did we underdeliver? Number one, the global spreads declined much more rapidly than we had anticipated; number two, we had interruptions in our operations that we were not under liability. We did not talk about reliability in all of our presentation. But when we talk about cost transformation, we talk about each segment's aspiration, we talk about digitalization, we talk about Lean Six Sigma. All of them have a component of how can we be a better operator of the assets that we own. So that was the second issue that hurt us. And the third asset, third reason was that -- for instance, the cracker. We had a -- and spin to the cracker starting up, I believe, in the second quarter of 2019, it just taken that long for that to start up. So I think primarily, these 3 factors hurt our earnings in 2019. And let's say, okay, that's behind us. We have recognized that these are the 3 things we can do better. And we anticipate and we believe we would do it better. Any questions, please? Yes, Khun-Poom?

My question is on rPET industry. I want to understand your strategy there. I noticed that there are a lot of newcomers into that market and securing PET waste could be something that's quite challenging for you. So maybe you could share us a bit of how do you think that competitive landscape would be in the rPET industry? And how you will strategize yourself to hopefully, that you can command the same market share or more in the rPET?

So Yash, you are the guy who understood it for the last 9 months, tell us.

So yes, there's a lot of competition coming in this space, not just from PET producers, not just new sectors, but also from waste management. Brand owners are also setting up their own recycling plants. What we're doing is we're working with all of these stakeholders in the value chain to build infrastructure together. So in the coming year, you'll also see more announcements on JV announcements, some stakeholder joining alliances. And the reason for all that would be to increase collection rates.

I would add to that, that, in the past, even presently, there are lots of recyclers out there and PET recyclers who are all standalone mom-and-pop shops. And it's difficult for those business to make healthy returns for themselves. So consolidation in that field is definitely going to help because now we are not only the virgin PET supplier to the customers, but also we are blending rPET into that product mix. So since we have the reach, we have the global platform. I believe that we would be able to give a better solution to our customers. Risk management collection remains a challenge, and that is why, in Yash's presentation, he showed what would be the recycled content and the PET demand by 2025. It's still only at 30% in the west. It probably needs to go up to 40%, 50%. But the 30% that Yash has shown in his presentation is doable. And in the emerging markets, there is less intensity of seeing recycled content because in the emerging markets, most of the PET -- the collection rates are better than the emerging markets. But they get driven to the fiber sector. So there is the whole use of the PET. When it goes into fiber segment, it is slightly downgraded or down-cycled because in the application, which are hidden by staffing and some applications, matrices, you don't see -- you don't need to have the best clear flex. So the collection, these are better in emerging markets, but not necessarily fully upcycled. In the developed markets, there's a full need to go for 100% recycling, but collection remains a challenge.

And just to add, a big part of IVL's strategy is M&A. So when you're acquiring an existing second tent, you already have the feedstock there. Also, we're expanding our existing facilities, where we're already securing the feedstocking today. Going forward, chemical recycling will also help with using lower grade quality feedstock.

I have one question for D.K. Can you add some color on the project prosperity? And how far did you go on this chain? You want to go to all the way through to polyurethane. What is the strategy here?

Yes. So as I covered in my presentation that you have purified EO and propylene oxide, both. And this project will be basically high value-added products, which is in ag chemicals, which is in the packs, which we call it propylene black holes and all that. The new blend PO, EO in the reactors -- Now we are shipping purified EO to some other customers. And if you see the profile of the customers, there are many people who buy purified EO and PO and make it. With the competitive landscape on this project, the feedstock is very cheap. We will buy natural alcohols. You can also buy synthetic alcohols in this. Today, it is at the pre-engineering stage. Our target is that this project comes by 2022. There's a lot of work which has been already done, and we'll get the board approval very soon on that project. And as I mentioned, a very conservative Huntsman that presented in the management presentation, the EBITDA potential from this project is much higher, but we have maintained EBITDA at $6 million, and we are taking a higher capital investment, which we believe they should have a payback of, if we were more conservative then, maybe 2 to 3 years. So we'll keep you updated as we move on this project.

If I may add one -- another important element is ethane oxide is being leveraged for surfactants, but also the propylene oxide. So the project prosperity adds new dimension and new products and new applications as part of the expansion. This will be much more value-added as we go towards the higher end of the surfactant business.

And to add to both of those comments is that we have a great R&D platform. How many people do we have in R&D? We have a whole lab, we have a whole pilot plant, so we have a lot more capabilities than we ever had.

I think there is one question online to that. They're asking that, do we have any plans to expand in the propylene or polypropylene going forward?

Let me answer that. So not in this period of '23, but IVL is also a large buyer of propylene and polypropylene. We consume more than 400,000 tons. A world-class plant produces 500,000 tons. So at Port Neches, we have a huge site, 2,800 acres. We have all the pipelines running through it, and we are in the propylene oxide business. So this potential opportunity is there for us. We still have to study it. We have not done any studies where we end the cycle in that. But this is a huge project, where we can get into PDH, and we can get into polypropylene, let's say, within this decade. Yes, sir?

I have 2 questions. The first one, I'd like to know that how the transformation stage of the company over the next 4, 5 years, will be, considering that plastic ban and boom, that you actually -- on the one side, you talk about the booming of the PET. On the other side, you actually talk about the threat of the ban. So basically how you transform in that kind of situation. Let's say, how fast you can increase the capacity of the rPET. And how fast you can reduce your working production. I mean just an example, how can you, I mean, achieve that kind of goal in terms of financial, in terms of operation and actually in terms of strategy as well? That's my first question. Secondly, specifically for the fiber segment, how you actually achieve and enhance the EBITDA margin of the fiber from really low level 3% to over 10%, 15% target. I'm not quite clear how you can increase that [ 5x ] in terms of margin, if I'm not -- I'm correct that you actually show in the presentation.

So we have one slide on the recycling, on its impact. You said a word that reduced the virgin PET, which is not the case. So there is a backup slide, I believe? So there's a backup slide where we talk about the impact on PTA or -- don't we have that? This one, okay. So Yash, you want to explain this slide?

Yes. So Mr. Agarwal also showed a slide where, today, PET accounts for 50% of all non-alcoholic beverage packaging. Going forward, we estimate that to grow to 56% by 2030. So that's one of the growths that is coming from PET. Also -- so what we expect in the long term is rPET will grow by about 10% whereas virgin PET will grow by 1%. Globally, around 3% to 4% for the combined. And also, when you're talking about the ban, what we've seen is countries have tried to ban PET, however, they found no alternatives. For example, India last year, in October, were looking for alternatives, and they asked all their scientists to find something. But they could not find anything. So PET remains to be the preferred patching material. And you've also have the CEO of Coca-Cola gone out to say that PET will remain their preferred packaging as well because it has the lowest greenhouse emissions, greenhouse gas emissions.

So I think the recognition is coming in the minds of the regulators as well, who, when this onslaught on waste and plastic came about, people had a knee-jerk reaction and said we will ban. When they delve deeper into it, they realize that there are good plastics and PET is one of those good plastics. So PET serves the world in a more positive way, so they need to continue to look after -- when they think of ban, they should not generalize. So single-use plastics as everything -- the items that are getting banned are called single-use plastics. And now there's a clear nomenclature of good -- what are single-use plastics. And nowhere in the world is PET part of the single-use plastic. So that gives us a lot of confidence, plus hearing from our stakeholders, hearing from our customers, hearing from the global brands. This is something that they will keep in the portfolio and even grow this in their portfolio. The challenge for us is the consumer sentiments or the consumer perception. So we are working with global PR agencies on trying to understand the consumer mindset and trying to understand how do we communicate this to the consumers. Coke is doing a great job of it. All brand owners are doing a great job of it. We are participating in all these associations in all these industry groups. And I think we will come out with a good way to communicate with the consumers for them to see the advantages of PET. The area that needs a lot of attention is how it gets disposed, how the plastic is thrown away, which lands up, ultimately, if it lands up on the beaches or the rivers or the oceans, how can that be stopped? So a lot of consumer, hygiene and behavior will also help. And I think that recognition is coming. That's why we have Yash, the youngest member of IVL, leading this initiative because he understands this consumer mindset better than I. Mr. Gill, on fibers.

I think just to finish on recycling because we have a follow-up question on that, then we go to fibers. So on recycling, the CapEx seems to be higher than the virgin business. So how do we plan to grow the returns or maintain the returns like double-digit in the recycling business?

Yes, Mr. Agarwal, you have...

Yes. It's a good question. Basically, it is the bale price right to the rPET, okay? The bale price in America is about $300 per ton. So when you have this entire value chain from bale to rPET. RPET, today, the pricing are higher than virgin prices, significantly higher because for the brand owners, he's using rPET plus virgin, and he's willing to pay high prices. So it's about -- today, I'll give you an example, about EUR 1,400 per ton. So as you rightly asked, very important is the feedstock availability and having the right technology, so that's why we are scattering these investments around the different places where the deposit states are there -- deposit statements. You return the bottle back, as you get the redemption. So this even, if the investment of $1,500 per ton, or even in chemical recycling, the investment cost per ton may be higher. But then the feedstock becomes very cheap, it may be $50, but it has a negative value because people are disposing of those colored bottles, need fines. So it is a tradeoff between the investment cost, feedstock and the final rPET prices. So we are very confident, actually. And we -- all these are not linked to raw material pricing. These are linked to bale prices. So the formulas are linked to bale prices. Like I clarified to you, as I mentioned to you, bale price divided by the yield plus the [ other ]. So you work on a fixed [ other ] and the brand owners are given on that, which assures the return on investment. So that's what is important that you must have feedstock, as you rightly asked, and you have the right technology and you make the rPET. We are also the largest single pellet solution provider. What does SPS means? That you put the flakes back into the backbone of the resin. Now we, in Mexico, we make up the 30% of the flakes is put back into the resin. Now they give for that 30% much higher prices. And my cost of production is even lower than that. So that is creating significant...

D.K., this is a public domain. Your customers are going to come after you, if you're making too much money.

Yes. But they need you. They need you for the cost. If they want to achieve their commitments, they have to need a person or the company like IVL, who's willing to make investment in this value chain. I hope that answers the questions, right?

Okay. On fibers, your question. First thing, I would like to say that fiber was in double-digit ROCE in 2017. And then I mentioned in the presentation that we had a higher rate of capital infusion in the last couple of years, wherein we had made some very strategic investments to complete our strategy for automotive, particularly, and also India investment. But just to let you know, the [ whole ] will be unlocked and [ whole ] will [ ease ] the double-digit ROCE going forward. First of all, I just wanted to refresh you that we have been acquiring company after company. We -- at the moment. I mean 1 year back, I was having like 50 sites in 1 envelope, and 1 CEO. But -- and then we had about 13 CEOs across this thing. So what we have done is now we put these 50 sites into 3 envelopes, wherein about 10 to 12 companies have -- or more, 15, into 3 envelopes. So now we don't need the 9 CEOs against that. We need 1. We don't need the 9 procurement managers, 9 HR, 9 -- so the real synergies coming when we are consolidating these highly spread out 50 sites into 3 sections. So this will reduce the fixed cost across, that's number one. Number two is, these companies were competitors before we consolidated them into IVL. And they were continuously making same products -- similar products on all the assets. With this consolidation we're having now, Hygiene put into one envelope and customer-facing application-driven, they would be able to optimize the assets by making -- bringing in efficiency in making the same product on the same asset. So reallocating or optimizing. So that will be the second efficiency. The third lever, which is -- which I believe is very strong, that we have a capacity headroom in fiber business, which is coming from automotive area and also from the lifestyle, which is particularly India. So this will give us organic growth. So organic growth is another lever besides that fixed cost, and the third lever is, of course, I mentioned to you about this $130 million operational efficiencies, which also improve the fixed costs I mentioned earlier. And the fourth lever is the project. We are focusing very, very selectively on projects, which are less than 2-year payback. 2-year payback, 1.5, so that's a kind of -- which are automation and which are very fast track utility improvement, et cetera. So we are very, very focused on making sure that we bring our margins up through these initiatives. And on the capital employed side, working capital reduction is something, which we are targeting very aggressively. We plan to reduce working capital by [ $800 million ].

So what is the last... let me explain the last point. Basically, you see on the slide, we are reducing our capital employed from $2.4 billion to $2 billion. Most of that is coming from better working capital management. So on one hand, the output is going up from 1.6 million to 2 million tons, which requires normally more working capital, but we'll be able to reduce our working capital because we'll be able to reduce the number of working days, inventory days across our platform. So that has a multiplier effect. What Mr. Gill was mentioning about a dozen CEOs, now combining down to single digit. Basically, the same -- different arms of the same broader business will go to the customers. So the customer was getting 3 calls from 3 IVL companies. Now they'll get a single call from consolidated IVL. So better intimacy with the customers, better in-house management, better product management, better product mix, better working capital management. Next, please? Yes?

I have 2 questions. So on the recycling and returns, so let me ask the question the other way around. Because we have seen so many PET players trying to acquire recycling assets everywhere, and it is growing of importance. So how do -- what are the potential hurdle rates you are looking at for the next few years? And bear in mind that many of the competitors might be vying for the same assets. That's my first question. And the second question is more shorter term, considering that the LTM 3Q EBITDA is $1.3 billion, and you have completed Spindletop Gas Cracker, et cetera. So what would be your projection for this year, for 2020?

So on the first question, who wants to answer that? On recycling, still.

So -- so as we mentioned, a lot of these recycling plants have been run by mom-and-pop shops. And today, they cannot compete anymore with all these bigger guys coming into the competitive landscape. So when we see M&A, we actually get it for a much higher return than when you do a greenfield. For example, our CapEx per ton today would be under $1,000. Whereas going for greenfield would be $1,600. So also doing greenfield, you have a 2-year lead time to get there. So the hurdle rates through M&A are 14%, 15%. The ROIs are at that rate.

And what we have -- we would be -- where we'll be more focused would be, we have a global footprint on rPET. So you would want to have recycling assets at least everywhere where we have rPET assets because that -- where we can also consolidate our management and our leadership. So we'll go global because our intention is to beat our pledge of 750 kilotons of recycled PET or recycled polyester. Our internal aspiration is to go to 1 million tons by 2025. On the 2020 guidance, you guys have fallen flat so many times, giving you our guidance. So I'm keeping it at 2023 for the time being. But it will be better than our pro forma 3Q '19 EBITDA. Our pro forma 3Q '19 EBITDA is $1.6 billion, and we expect it to be around that, a little bit on the better side. Where most of the growth CapEx or the growth EBITDA is coming from, apart from cost transformation, is Corpus Christi, about $100 million; recycling, $125 million; Specialty Chemical business improvements and the acquisition we made in Germany, about $15 million; Spindletop and project prosperity, there's a bulk of it, more than $450 million; and the Gas Cracker, about $100 million; and the fiber projects that we did not get into -- the number of them, but that will give us about $80 million. So altogether, we have about $900 million of growth coming from committed CapExs. What else can we talk about? Yes?

Yes, I'd like to ask about the PET industry because I see IVL is turning down the margin outlook of PET from 2020 to 2023. And based on the integrated PET industry that you provide is about $20 per ton. And my question is, what difference or similarities that you see the PET industry today and the 2012, when the margin at about below 200?

We go to our guru, D.K.?

Well, if we could take that slide, you see the -- you have to see inside China and outside China. Very important. There are no assets getting built outside China. What you saw in '11, post '12, '13, '14, the PTA margins were quite low. The outside PET capacities are not getting built, the PTA capacities are not built. So the integrated PTA/PET, and particularly the mix, when you look at Brazil, all those portfolios. And as I said, that our premium on that. So $500 million was lost against '18. You just saw that bridge, right? And what does $500 million means is $100 per ton. So in our estimate, which we are doing in 2023, we have taken all those factors into consideration of the conservatism that how this integrated PET margins can keep going down. And '12, '13, '14, if you see the PTA margins for growth, but they are much below replacement level. Today, the growth of PTA industry is very, very strong. They're still 5% to 6%, the growth of PTA happening in China. Outside China, also it is happening, particularly in India and other developing world. PET, also, no capacity is coming. And actually, there was a good question that how we will ramp up if the virgin demand goes up. You saw just the slide, the -- inside Europe, the virgin growth may be lower because there are more and more drawback. In Americas, it's still the virgin growth will be there because the collection is not adequate to meet the rPET, which will take time to collection. But the developing world, where 80% to 90% is already collected. In Thailand, 85% is collected back, goes back into fiber. So there, the virgin demand will continue to grow. So we'll help -- actually, we've not factored in here, that we may have to create more capacities. So we are not exposed to China. Think like this that we are not exposed -- our investment portfolio in China is very limited. Today, even in coronavirus, as we are elaborating, and our team is working very hard, entire supply chain of China is stopping for 10 days. And 10 days means so much clotting, so much PET cannot flow out. Then we are able to provide solutions to our customers because we have manufacturing sites outside China. So this spreads are below reinvestment level, and the investment cost outside China is very, very high. You've seen how Corpus Christi cost is coming in, right? In Europe, nobody is even thinking of building the branch. We acquired most of the other plants outside. There's no plant -- which the last plant outside China, it was in Vietnam, which was lying in boxes for a few years. And that's where the growth -- this balance will happen and will protect outside China by trade barriers, which we are already doing. Americas. U.S. has trade barriers actions from many other countries because you cannot have unfair dumping. Europe, it is still having 6.5% duty only, but no antidumping duty. So our focus is more outside China. So you have to distinguish between China and outside China. China, a lot of capacity of paraxylene is getting built. Glycol is getting built. So you see the paraxylene margin collapsing. Glycol margin collapsing, right? But our exposure of paraxylene is in America, where there's a deficit of PX, where the PX pricing will be different. And Blackwell, as I mentioned, we have a competitive advantage. Of course, we lost a lot of spreads, as you saw in the bridge, in the glycol also. But glycol, again, you look at polyethylene today, [indiscernible] spreads are so bad in polyethylene and same in glycol. This does not just give any reinvestment. So they have to come back. IPA I also explained to you. You're going to have growth business. The most important, I'd argue, is the business is growing. And recycling, along with the virgin PET, provides a perfect solution to our customers globally. And our focus on recycling will be more in Europe and America to begin with, including Brazil. Asia will be -- because Asia is already getting recycled a lot in terms of fiber.

Let me add one important element to what D.K. said growth. PET, as a material, is probably one of the better molecules in the plastics than anything else. It is one of the most stable molecule, and hence, it can be recycled often unlike other plastics. That's first. So because of that, and there's another area that higher property material, like nylon, polycarbonate, polystyrene. There's also intermaterial substitution taking place where PET is evolving as a better choice. So as we go forward, part of our adjacency growth that you heard is also to leverage this into some of the other applications. And you already know that several of our customers coming to us to replace black polystyrene in some of the applications -- consumer applications, so -- because of the recyclability. So this is an another important factor. So -- but we look at the past, but also important to look in the future, as we go into it, and as D.K. mentioned, 50% went up to 56% partly because of the [ synchronous ] material substitution as well.

Thank you. What else comes to your mind?

There's one question online. If you go to Slide 14, it's related to what we were discussing. So the question is that if China continues to add capacity, how do we see our returns and the cash flow improve? But this is probably -- you answered that question.

And let me cover that one. So there's a total shift in our mindset. When China added a lot of capacity from '11 to '14, '15, and destroyed the market for that long, and it only recovered in 2018 because of -- not because of China, but because the stress that they put on the whole industry, and some companies could not sustain that. So there was an impact on the supply in the western world. This time around, we -- so at that time, we said that now China will learn its lesson and China would invest less. But recently, we have seen that they continue to invest. So we did a think tank in our company, and we said that "what should be our viewpoint?" The viewpoint we founded in the company is, let's assume that China will continue to expand as rapidly as they have done in the past. They are also now expanding into upstream, where they are replacing imported products with their own manufactured products. As they produce more paraxylene, MEG, PTA, then it will be natural for them to produce more PET and more fiber and more downstream. The only pressure they would have is the debt service. So depending on what the government policy is, depending on the health of the companies, they would try to get that entire sales between domestic market and export markets in a balance where they can service their debt. But let's assume that they will continue to be the largest player and continue to expand. So how does IVL react to that? So what you have seen today is IVL's way of looking at that. Basically, we are saying, okay, we are not adding PET. What we're adding is downstream of PET, which is recycling. So we continue to grow our business of integrated PET or combined PET by getting into more HVA businesses, because recycling for us is still an HVA business because it's a specialized business. It gives us a healthy return of 12% to 14% ROCE in spite of the high cost of each entity, as already mentioned. Since we won't be expanding our PET, absolute -- our virgin PET business, therefore, with whatever growth is taking place, roughly 4% growth, split between virgin and recycled. We'll have a better loading of our assets. We are also the strongest PET company in the world, both from a management perspective, from an asset, geographic perspective and from a balance sheet perspective. So we'll be able to continue to serve our markets better with the right investments, especially in the recycling space. So we'll get more intimacy and more alignment with our customers, and that is what is going to keep our segment. Better utilization rates. We have import parity advantage in all the markets. We are in high-growth markets, like India. We have raw material security. So all this combination is what will keep our PET business healthy. Can we go to the PET slide -- combined PET, you have the bridge from '18 to '23. One of the things that was pulling us down in '19 was our PIA -- or IPA business. There has been strategic initiatives taken in that. And we have converted our -- we first converted our PTA plant into IPA. Now we are converting that IPA plant back to a swing capacity. So we'll be able to serve both PTA and IPA. Corpus Christi is not there yet. So until Corpus Christi comes up, there is a demand for PTA in North America, and therefore, we'll be able to fully utilize our Decatur facility. And that is how we'll be able to improve the specialty chemicals operation. We mentioned about other polymers transferring to PET. We have to build some capabilities in specialty PET. We have our Auriga site, we have our Gersthofen site, we have our R&D. So we are looking at reducing our commodity PET in these 2 locations and replacing that with specialty PET, which will serve new applications. So the FMCG sector, in medical segment, in defense segment, in paraxylene substitution and polypropylene substitution. So in segments where plastics are less recyclable into a recycled PET. So as you can see, the transformation from $1 billion to $1.2 billion, $1.3 billion, even with a drop of $500 million of margin is getting replaced by product mix, by cost transformation, by certain organic growth and projects. Organic growth essentially means better utilization as well. So there is -- it's not turning a dot blindly. There's a whole calculation behind this. And what we are doing is we are putting a tracker, and we are going to -- and not going to -- we have now defined that executive variable compensation is linked to them achieving their numbers.

Any more questions? While we have from the floor. We have on Slide 61, one question, on the Gas Cracker in the U.S. So we have given this cost curve for the different market. But what is ideal cost curve in this market, so for cracker, so that's the specific question. And our gas cost. So if you can give some more information on this. That's the question.

Yes. So this is the North America large site cracker. We are very close to that because we have some feedstock advantages in Port Neches. And also the other -- our crackers are suboptimal versus the large cracker. So the penalty is very little, netting off against the feedstock. So you can see, as I just mentioned, this is based on higher gas price. The gas prices have come down. Ethane is quite surplus today. Ethane is actually $0.16 a gallon, which just basically makes $0.06 per pound ethylene, which is $130 cost of ethylene. So this actually is lower than that. So we have the -- actually, the price is determined of the end products like glycol, polyethylene by naphtha crackers. So that's where you get this margin being in the shale gas. And ethane availability will be a lot because in [ Marcellus shale ], a lot of ethane is going to get produced, and there's adequate ethane as projected for the future years. So this competitiveness will remain a long term.

Okay. And on MTBE, this represents IVL essentially. So the PO/MTBE cash cost, this is our own technology, and this is a very good cost plan that we have.

And MTBE, also to add, is important that U.S. MTBE prices, FOB basis, are much higher than Europe and Asia, so when we -- you can track that also. It will provide you all those data on a monthly basis on how the U.S. MTBE prices, which basically serves the Latin American markets. So you get that advantage also. And as Mr. Lohia mentioned, the cost curve is pretty strong and we are in equal footing now.

Can we show the slide on our assumptions on PO/MTBE. So D.K., you want to explain this?

So C factor, C factor, you make basically MTBE from isobutane, and -- I'll summarize, and you make methanol. So if you see the graph here, as I was just mentioning, third quarter and fourth quarter, this went through $2.20 a gallon, which is actually $480 per ton. And what we have assumed here is $0.94 a gallon, which is roughly $330. And what does $120 means on 650,000 tons is $18 million upside. Now don't -- we are not counting on that. But the forward curve, which shows how the methanol cost is likely to it, whereas you all know, methanol is made from gas. And if the gas is lower, then the methanol cost is lower. And there are a lot of investments coming in the United States in methanol. The butane, which is, again, a significant part as a percentage of crude oil is coming down. So this is, right now, a very, very conservative estimate, which we have taken, but you can see historically, there has been volatility in the market. Third, fourth quarter has been very, very strong, which normally, seasonally, should be weaker. If you go to the fourth quarter of '18, there, you can see the second quarter is normally gasoline season. And then as the gasoline season comes, you should have basically better by -- you can see historically, so we don't know how the second quarter of '20 will be, but we are anxiously waiting for if and how it unlocks.

A very important element, for Gulf Coast, whenever we hear shale gas, you hear all about shale gas is beautiful, lots of it in North America. The most important key component come out of shale gas: ethane, methane -- ethane, propane and butane. Part of the butane goes into this MTBE. Ethane, which is 70% plus, so we're getting that at an extremely attractive pricing, and that is what we're leveraging entire -- across the entire value chain. And that is the beauty of this acquisition is that what we're getting is the absolute cheap raw material because of the shale gas. And we're converting that through a cracker into the multiple products beyond. And that is where we are really capturing entire value chain. So all the numbers that D.K. described, it derives from the cheapest source of the material. And that's why this makes the most attractive in terms of the location and leveraging their offer.

They call it NGLs. That's when we [call it ] NGLs. We'll keep advising the C factor.

Yes. So we'll add the C factor, the MTBE spreads on our monthly supplements to you. Any more questions? On Page 80, I have one online. So this question is that, well, I think -- yes, Page 80, 8-0. I think the slide number is sort of mixed up, so I'll take another question. So we're asking that, do we have any women in the IBC?

Finally, somebody has a question for you, Roberto.

That is the IBC in the fiber business.

In the Fibers -- in the Lifestyle business?

Any female in the lifestyle business?

Yes. Well, let me answer this. We, of course, we cannot only highlight our strengths. We need also to be realistic on our weaknesses. And this is one of our weaknesses. And I'm certain, and my group CEO, are very committed to improve diversity in this team. So let me say one thing. In every industry, people are chosen and selected based on competence. That's the major criteria. And no other criteria can replace that one. So people managing business, they need to be competent, they need to have enough experience to do it. So in this industry, the majority of the, I can say, the available professional, is in fact, are men. However, we know, all of us know, that a diverse team create positive dynamics, create more openings, discussion on challenges, and create more transparent dialogue and create opportunities for business development. So we are aware of it, and we are committed to increase the diversity in this team. In the level below of what you see here, we have actually several women, which are part of the succession planning. And these colleagues are getting special attention on their development in order to have the possibility to replace some of these colleagues when they will retire.

On a lighter note, I can promise you that one woman on the left, Mrs. Suchitra Lohia, she's equal to a dozen.

Any more questions? So we have got the last one online. So that will be for Sanjay, is that, considering the M&A, that growth is now -- seems to be not a big focus or that is not in the plan that you have presented to us. So how did the company look at the dividends and the balance sheet? So are you going to reduce your leverage in the next 4 to 5 years? So what are your M&A plans and the dividend plans and gearing targets?

So maybe covering the M&A plans in the next 4 years, as Mr. Lohia explained, as the business plan shows here, we have only taken the committed projects. And the segment which is going to get most of the capital is going to be recycling, as Spindletop is done. So all the 3 other segments are pretty much well balanced and recycling is going to get the maximum capital. In terms of dividend, I think, as I mentioned, we will continue with our minimum dividend payout policy. That would be 30%. And of course, we look at what the market is -- market dividend yield is, and that will be consistent with that. The third item was on the leverage, yes, immediate focus for 2020 is to build on the leverage. And as we said, all Spindletop, we will deleverage. I expect that our long-term cycle, which is -- on a long-term cycle basis, we say, 1:1, that is what we should be there in the next 15 to 18 months, and then we see how best to optimize this capital structure.

So finally, IVL being IVL, we have to still put a spin to it. And the spin is that all our budgets are based on nearly historical low spreads. We are relying a lot on internal improvements on better management of our working capital to reduce our ROCE, to reduce the capital employed. So if the markets are better, we believe the markets will be better than what we have forecasted, and therefore, the deleveraging will take place faster. With that, can we end?

Yes.

Are there any questions, last questions? From the fifth row. Yes, please.

One question about shale gas in the U.S. If just Bernie Sanders becomes the Democrat representative and win the election, as your gas will be, I mean, some part -- actually closure? And maybe the gas price, even methane, would be a little bit higher. Would you have any thinking about it?

We have only one American on this, does -- do you want to comment on this?

Yes. I'll -- I'll take a shot, and, D.K., you can help me. U.S. always has been, even before shale gas came. Natural gas has been much more abundant in North American, just the geographical landscape. And with shale gas, whenever you diluted shale oil out, there's always plenty of gas. And the gas has been just born sometimes, just magically there it is. You can't convert fast enough. So shale gas, enhanced ethane, propane, butane, it is plentiful. And depending of whom you ask and what opinion you get from different experts, this is sustainable advantage that's there in the shale gas in the Permian Basin, Texas, Louisiana, Oklahoma area. So it is here to stay for quite some time. And that's why most of the chemical comes upward. Huge investment. And put into American Chemical Council, over $200-plus billion of investment has taken place. Still some projects are ongoing in terms of polyurethane crackers and taking advantage of the raw material. So it is sustainable, in my view, and that's how it is being -- therefore, geographical landscape helps that to have the sustainable advantage.

Shale gas was an evolution, technological evolution in the United States and it happened much before, even the time of Democrats. This has made the United States a net exporter of crude oil. And the economy has the amount of investment which has gone into it, and the competitive landscape, which it's created, is very important for the U.S. economy. So I think whichever political parties comes in, their focus will be always to create the earning potential environment, and I don't see that there will be any negative change. And particularly where -- the technology has evolved so much over the last few years, and the competitiveness has kept increasing. So I think that's very, very important. When you look at United States, you cannot go into manufacturing downstream jobs, right, and this is something with their natural resources, which they are promoting into the downstream products. And I think this industry will continue to thrive.

And for the sake of record, a lot of the shale gas thing started under Democrat while Obama was president.

Good questions.

No more questions? Then we would thank all of you for coming. And...

Please stay back for lunch.

Please stay for lunch. Thank you.