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

Well, I'd like to welcome our viewers here today. Indorama Ventures, or IVL, this morning reported its second quarter earnings update, and they reported a core EBITDA of USD 477 million. Today, I'm joined by IVL's CEO, Mr. D.K. Agarwal. Welcome, sir, and please tell us what's driving this result.

So thank you, Stuart, for having me on the spin. You are right, we reported core EBITDA of $477 million, which is a growth of 30% quarter-on-quarter. This is testimony of our business model, of business resiliency, geographical diversification and product diversification. The demand in the entire value chain has been quite strong in spite of interruption in the supply chain. The PET has come out as a very preferred polymer. And as the stimulus packages came up, the consumer demand is stronger. But when we look at Lifestyle, we look at Mobility, Hygiene or on the Oxide side. Of course, the Olympus program is also on the track and delivering on the cost reduction which we have planned. So the first half result, we are happy about it, but it is not the full potential of the company.

Well, talk a little bit about the potential of the company, if you will. So we've had a good first quarter, but what can we expect for the rest of the fiscal year?

Yes. As you know, the first half, our Lake Charles facility was not running. We shut down this facility in August because of lightning strike. We were fixing the safety issues. And I think that's behind us. It is in commissioning stage. The crack margins are good, and this plant will start in August, and we'll see full benefit coming out in the fourth quarter. And as you know, the crack margins in petrochemical is quite high. So we see the second half will benefit from stronger demand, entire value chain. As inventories are dry, the people are coming out of cages. The onboard demand will come up. Even in mobility side, as we know, the -- presently, the car production is reduced due to semiconductor constrain, and that will hopefully get resolved and we'll have more stronger demand. So I see a very strong demand coming in the second half. Our Olympus program is on track. And as we've increased production, we are very excited about the second half results and '22 onwards.

Good. Well, as we know that a lot of the market focus or the spotlight is on sustainability and certainly in the case of IVL as well. As I understand it, you've also reported a quite good quarter in terms of sustainability with at least several announcements. Can you tell us about that?

Absolutely, Stuart. PET has certainly come out as a very preferred polymer. Sustainability is taking place at present in the marketplace, and we are aggressively booking -- moving towards our commitment of 750,000 recycled PET capacity. We made a unique acquisition of Dallas plant, which is actually now running at 50% and will start going up to ramping the capacity. We launched Carbon Neutral PET, and we are very happy to report that people are placing the orders for the Carbon Neutral PET. In other verticals, also, we are working on biodegradable fibers, and that is attracting -- that is having a lot of reaction from our customers. So -- and the carbon neutrality, which is the present very important element, and we are investing in this. So sustainability is a very important driver right now.

Good. Well, thank you, Mr. Agarwal, for bringing us up to speed with the second quarter results. And of course, also casting it forward for the rest of the year. I'd like to thank you for coming on. Thank you, Stuart. Thank you very much.

Good afternoon, everybody. I hope you all a safe and fine. Welcome you all to Indorama Ventures second quarter results briefing. Joining me today in our earnings call are our group CEO, Mr. Aloke Lohia; along with Indorama Management; Mr. D.K. Agarwal, CEO; Mr. Sanjay Ahuja, group CFO; Mr. Udey Gill, Chief Strategy Officer. I'd like to just start with a quick disclaimer that this meeting is being recorded, and a replay will be available on our website after the meeting. And the presentation contains forward-looking statements, and they are made based on the industry available data and views at this point in time. And specifically, for this presentation, our Lake Charles cracker, it is under commissioning stage. And hence, the expenses for second quarter and historical periods we have taken as extraordinary. So with that, now I would invite Mr. D.K. Agarwal, our CEO, to take us through the presentation.

Yes. Very good afternoon. I hope you're all keeping safe in the present pandemic situation, which, unfortunately, in Thailand is just picking up. So please keep safe. I'm pleased to be here to give second quarter results to you. IVL registered a core EBITDA of $477 million, which is a 30% quarter-on-quarter up and 59% year-on-year. This translates into a reported net profit of THB 8.34 billion. If Thai baht weakens, our translation of earnings from abroad increases. So always a weaker Thai baht helps in earning per share. The core return on capital employed is about 13%, which is up 443 basis points quarter-on-quarter and 715 basis points year-on-year. This, as you know, IVL has built around the major principles: one is the product diversification, geographical diversification and integration. Our resiliency of the business has been tested during the COVID in 2020 and also until 2021, which shows the relevancy of the business. And as you saw in the video, we are very excited about the second half results. Our demand for our products remained robust across all the segments and all the regions. As you can see, PET came out as a preferred polymer, very strong demand. We achieved higher-margin across our portfolio, leveraging on our integrated operating model and reasonable supply chain advantages, offsetting the headwinds in the ecosystem, such as shortage of key raw materials and logistic constraint. Just to explain you what integration advantage is, that like in Europe, as you know, that our competitors had force majeures. But we were integrated, so we could supply our PTA and serve our customers better and [ that ] was repeatedly it. So IVL management during this difficult time has demonstrated the agility in responding, navigating the ecosystem and continuing to provide value to the customers. And I can give you an example. As you all aware that there is a shortage of containers, we moved about 70,000 tons of PTA by bulk vessels across the globe to make our raw material available for the PET. So the management's agility to take the -- serve the customers and take advantage of the marketplace. For the quarter point, our company-wide cost and business transformation Project Olympus, as we know, that we rolled out $610 million targeted savings by 2023 is making very good progress. This has gone calculated write-down at the shop floor, which I'm very happy about it. This quarter itself yielded $28 million incremental efficiency gain with the majority coming from sales excellence and operational excellence initiatives. We keep working on debottlenecking, we keep reducing the cost. Since the program has been kicked off in 2020, we have been able to achieve $167 million efficiency gain. So it's a how to enhance the margins as well as keep reducing the cost. The strong cash flow supported the debt repayment, ensuring our deleveraging is on track. Our net debt to equity ratio reduced to 1.27 in June 21 against 1.42 in December '20 and is expected to go below 1.2x by the end of the year. Naturally, our deleveraging supports our group strategy and M&A activities in our core business. As you know, when the raw material goes up, our working capital goes up. So that is also impact. So this debt to equity is after increased raw material costs. Let's move to the next slide. Can you move to the next slide? Is it -- somebody move it? Yes. I think it's very important to understand the macro trend in the world, what is happening. As I mentioned, the stimulus packages are coming in. You can see that GDP growth was negative and 3.2%, driven by COVID. In 2021, 6% is the predicted growth, followed by 4.9%. So the global economy has actually recovered very strongly since the lows of 2020. And the PMI, as you can see below, manufacturing impact shows strong improvements and healthy GDP growth for were posted. And what does it translate for our business? We are in constant and business. We serve the customers. We are not in luxury goods. This translates into a strong demand for us. With the exception of COVID resurgence in Asia, economies are bouncing back and consumer demand is booming, as you can say, across the world. With the high demand, I mean, everybody was pleasantly surprised that Brent crude has continued to rise, closing about $75 a barrel in June, the first time since 2018, and you can see the increased crude oil is translating into inventory gains, which is a difference between reported EBITDA and the core EBITDA. The freight reversal in consumer demand has resulted in supply chain constraint in first half of '21. I'm sure you are all aware that freight rates from Asia to western markets have increased fourfold. Actually, there are many vessels waiting outside Los Angeles to berth. Now what does it mean for us? When the freight rates go up, basically, we are operating Europe and Americas, where our pricing is based on import parity. So naturally, we get the advantage as our -- we are integrated and our raw material is captively available. And this, of course, translates into a better earning. The European landscape, as I mentioned, has been affected by the raw material shortage, particularly for our -- some competitors. And as you are aware, the North American market became very tight, affected by the Polar Vertex related tightness. This happened in the first quarter. You could see entire value chain, whether it's polyethylene and polypropylene, all became very, very tight. I think we are going into a phase where there's a consumer demand, which is very strong and stimulus packages are happening, consumers are spending. And we haven't still seen, because as the vaccinations roll out, we'll see more demand coming up, and the inventories in the system are dried up. For IVL, the positive global sentiment has resulted in a strong demand for all of our key products and a strong margin. And when you have such opportunity, IVL's management has been agile to leverage on our integrated model and reasonable supply chain advantage to adapt to the changing landscape and to continue to meet customer needs. And actually, there is a change in the trend now. And the customers, they are looking for additional supply resources. And as we are negotiating our 2022 contracts with our customers, we are already looking for a very good increase in those which will get reflected in '22 results. Let's go to the next slide. As we mentioned on the video, the sustainability is a very, very important drive. We have a commitment of 750,000 tons rPET to Ellen MacArthur Foundation. And as you saw, PET has undoubtedly become as a preferred polymer in times of pandemic, for hygiene, for safety reasons and recyclability. You know the cover which the health workers use is made from PET. We remain committed to our 2025 recycling target of creating a capacity of 750,000 tons and providing single stop solutions to our customers. In this endeavor, we made 2 major announcements in this space. We first acquired CarbonLite assets in Texas, which went into bankruptcy, a significant producer of rPET in Dallas, recycling more than 3 million bottles per year. Similarly, we announced a greenfield recycling facility in Indonesia to process almost 2 billion bottles annually. Here, we are working closely with the Indonesia government to divert PET waste from the waterways. The PET waste was just polluting the rivers and the marine. Please don't get it wrong with this investment in recycling does not any returns. This gives a very strong results, and we are actually going towards all the solutions. As you know, rPET, [ SPS ] and the fiber [ scored ] also. So that's the sustainability journey. Let's go to the next slide. We did talk to you about Deja. This is something which we launched the product, Carbon Neutral PET. This past [ Analyst Day ], IVL probably launched the industry's first certified Carbon Neutral PET pellets through our Deja's sustainable brand platform. As you know, as all now worldwide that carbon neutrality is the key word as you want to keep the climate under control, and you don't want to have to 2 degrees centigrade increase in the world's average temperature. Our Carbon Neutral PET pellets are made with renewable energy, locally sourced material, low impact water transport to achieve a carbon mutual footprint for our customers. As we journey towards a more positive future, Deja is integral to our commitment, contributing to the achievement of UN 2030 agenda for sustainable development. And we are very excited that customers have shown interest, and they are with premiums on this product. You will see both products under Deja coming in the next 6 months. You saw in the video, I talked about biodegrade plastics, and particularly in our Hygiene field, and this is going to end also in the Lifestyle. We will be able to offer biodegradable, or [ packaging free ] or ocean-bound Deja PET options in the near to future. So you will see that this Deja will get rolled out into many product lines. Let's go to the next slide. Let's deep dive into the second quarter business results. As you can see from the graph here, we delivered a core EBITDA of this quarter of $477 million, an increase of 30% quarter-on-quarter and 59% year-on-year growth. If you see first half results, we are $844 million versus $598 million of first half of 2021 -- '20. This results in more robust demand, higher spread across the entire value chain, across all the regions. Our performance includes solid operating earnings across regions. Now very important point for you to note because if you look at the Asia spreads, our weighted of Asian business is quite low. We are very American in European centric. America and EMEA yielded a report performance of 59% higher core EBITDA in first half '21 as compared to 1,020, while Asia grew by 15%. As you know, Asia was getting affected due to the higher freight cost. We were able to leverage our integrated operating models and reasonable supply chain advantage to counteract the headwinds and raw material shortages and logistic constraints, and this is a testimony in our results. IVL, as I mentioned, was able to respond with agility, navigating the economic ecosystem responsibility and continue to provide value to consumer. And you can see the $477 million was broken into 3 parts: Combined PET is $319 million; $99 million is Integrated Oxides; and $65 million in fiber. In subsequent slides, we will be diving to it. Second half of the year 2020 is expected to parallel the first half of 2020. So I'm talking of second half of '21 as well as '22. I talked to you about the contracts which are getting negotiated to the customers in Western countries as they want to be -- have a reliable supply going forward. With a strong demand across the portfolio and across all regions this will be driven, as you know, by vaccine rollout and improved mobility. I was recently in Europe. The entire Europe has opened up. Americas have opened up because we don't want to remain in cages. We anticipate strong volumes and margin increase in IOD business. As you can see, Integrated Oxide is not performing because of the startup of Lake Charles. As you know, we shut down the Lake Charles in August after the lighting strike. We faced some safety issues, and we could not make them operational in the first half, but now it is -- we are in the commissioning stage. We expect production to start on August 10, and fourth quarter will have the full result of Lake Charles. And the downstream, as you can see, you will see in the IOD business, has shown a very strong strength. Integrated PET margins will likely adjust to increase in supplies as container movement eases towards year-end. Well, this is what we think. There may be easing up, but the container market is still very, very tight. We are just seeing the rates keep increasing. And as I mentioned, the semiconductor shortage is tempering some of our customers' demand in the Fiber segment, and the stake cost increase of polypropylene here leaving a lag and positive mechanism for our hygiene vertical. And I will cover this in the fiber, how does this lag impacts us. So one has to conclude that we see a strong second half '21 and 2022, anticipated to surpass our guidance, which we gave you in the Capital Markets Day presentation in January 2021 in spite of COVID pandemic. Let's go to the next slide. So let us deep dive into Combined PET. As you can see, Combined PET, which consists of PET, PTA, IPA, Specialty Polymers, resulted in overall EBITDA of $319 million, growing 23% quarter-on-quarter and 42% year-on-year, driven primarily by strong industry spreads. In the first half of the year, we created $579 million versus $418 million in the first half, with a sales volume growth of only 5%. First half also experienced improved shale gas products and the overall in the IOD business. As I mentioned, container shortages and feedstock availability issues have resulted in tightness around the entire value chain across the market, and this definitely benefits IVL. IVL's global footprint and feedstock integration has given distinct advantage in serving our customers in the present scenario of disrupted supply chain and shipping constraints across the globe. And we have been serving our customers from different parts of the world, Egypt material going to Latin America or Indian material going to the Middle East. So wherever we can get the cheaper freights. The European PTA industry has seen major disruption due to several declared force majeure, as I mentioned, and the North American PTA and PET industry faced acute shortage of acetic acid and MEG shortage, highlighting the advantage of integrated model. And that's where the integration model works per factory because when other customers -- other competitors cannot get the raw materials, we are able to get the raw materials, and we are able to unlock the value in the entire value chain. In order to continue to maintain reliability, we on purpose built our inventory to serve our customers better. While freight rates sold with the continuous shortage and vessel availabilities, IVL was rightly positioned with this geographical footprint to maximize the domestic realization by pushing cost increases in margins. Naturally, we were working on very low-margin for the last few years. We announced surcharges to recover the cost as well as enhance our margin, and it will get reflected in 2022 earnings as the new contracts will roll out. Another interesting part was the PIA business. As you know, in '20, it did not perform that good, delivered very strong results due to robust demand in PET, low-melt fibers. Low-melt fiber's growth in China was 12%, putting end markets, supported by IVL's ability to continue production in a disrupted supply environment. As you may be aware that we are the only producer in Europe of IPA. And in the U.S., we have a tooling arrangement and also we produce. So having a unique position in those markets. The recycling market, as I mentioned, continued to experience strong demand globally with [ dry port ] sustainability. With prices of recycled PET and flakes increasing quarter-on-quarter and year-on-year, people are willing to give much more premium over the virgin resin. This has resulted into higher margin, partially offset by especially high bailing prices in North America. So we have been able to take full benefit of this rPET. And I think this will be the future as we build our rPET capacity. Robust demand and rPET prices are expected to continue into second half. So if you look at -- you may have the question, how do we look at Combined PET? As I'm speaking to you, the PET margins in the first half of the year were not great, 85%. Chinese margins have started moving to 110% as we speak, as the Chinese policy demand growth is about 14% going. So outlook looks quite bright. As I mentioned, the pipeline is empty. There's a -- demand strong. The [ on go ] PET demand, the bottom demand will go as people are traveling, mobility is increasing. So we think that we'll see stronger volumes as economies open up, especially in Asia and restocking of pipelines. And the biggest marks which we got during this first half is a recognition by our customers of PET's beneficial properties, materially low carbon footprint, our reliability of supply, and that will help to keep the stronger demand in Combined PET. So we are very excited about this particular segment. Let's go to the next, which is another important segment, Integrated Oxides and Derivatives. Now as you can see, we are showing this Integrated Oxide in 3 parts. One is the downstream, the upstream and the intermediates. So intermediates -- so as you know, that there are 3 broken graphs here, $99 million in the second quarter, $77 million is downstream, $28 million upstream and intermediates is $5 million. Intermediate means MEG and MTBE, and I will talk about that. So our upstream portfolio consists of our 2 ethylene crackers. As you know, in Port Neches with 250,000 capacity and Lake Charles with 400,000 tons capacity. Now Lake Charles, as I mentioned, has not been operational in 2020 and first half of '21. Therefore, in order to give a fair representation of IOD's performance, which Vikash mentioned here, we removed the performance of Lake Charles, which was just the fixed cost and the extent of impact was just a negative cost of $13 million. What you will see in upstream is the recovery of our clean crack margin with the Port Neches facility achieving a $28 million core EBITDA. So here you can see as the crack margin went up. Now the question for you, maybe how the crack margins went up. In the United States, the ethylene capacity is about 90 million tons . We had disruption in photovoltaics. The demand of downstream polyethylene has been very, very strong. And as the disruption in the supply happened and some unplanned shutdowns happened, the crack margins strongly went up, which is reflected in the second quarter earning. Unfortunately, our Lake Charles was not running. As a result, otherwise, this number would have been much bigger. And as you know, that once Lakes Charles comes up, in fourth quarter of this year, there are a lot of unplanned shutdowns and the crack margins will remain stronger, and you will see this benefit coming in into the third quarter, late September in the fourth quarter. The intermediate comprises of MEG and MTBE. So what happened in MEG? Because we are energy producer, while Lake Charles was not running, we had to buy that at high cost. So you see that MEG had a negative margin, but don't look at it from isolation. As in PET, Combined PET, we recovered very strongly in that. So MEG now has seen improved margin. As you see from first quarter to second quarter, $32 million negative became $5 million. MEG has seen improved margins, supported by increased crude oil prices. What does it mean by increased crude oil prices? The world's majority of MEG is produced by naphtha economics. And now we are having the shale gas advantage coming back as the ethane is cheaper in United States. So this will get reflected, as you can see also in the crack margin. The consequent improvement in the shale gas economics has brought breakover cost advantage in North America. Stand-alone MEG margins are still lower than integrated margin as we are forced to buy spot at clean, as I mentioned, in absence of captive supply from our Lake Charles cracker. MTBE, which is a new -- the oxygen enhancer, hasn't seen recovery in the volume and prices are coming from our improved mobility and demand for transportation fuel. Demand in spread has been partially offset by unreasonably high prices of [ ethane ] raw material like butane and methanol. As you know, we make MTBE from butane and methanol and butane has a fuel value. So the butane prices went up, so MTBE margin didn't go up as anticipated. Now we see strong potential for further improvement in the MTBE margin and volume as mobility will improve. Now -- so this is about the intermediates, that as [ platform ] and MTBE, we think that the business results will continue to improve as mobility improves and the MEG margins and the Lake Charles comes back to operation. If you look at the IODs downstream, now what this downstream is, if people recall, we are one of the largest [ toxins ] manufacturer. We have a linear alkyl-benzene fuser at [indiscernible]. We serve ag, we serve coastal and home care, it goes for shampoos, and we are in the oilfield. As number of rigs are increasing, the oil demand is coming back. This sector delivered an EBITDA of $77 million versus $44 million in the first quarter. This is an improvement of $33 million. Increase in 3 business segments, linear alkyl-benzene, which goes for solid [ nitrogens ] is in a strong demand today, and we sold [ 30% ] higher. Similarly, the margins are improving. Actual means in the ag [ trends ], is also very strong. Personal home care demand is strong. The downstream products have remained resilient throughout the pandemic, and 2021 will see the full potential of this portfolio. Demand in this downstream segment remains strong, particularly as I mentioned, home and personal care, agriculture and oil field. Fuel demand has been especially strong. Propylene oxides, which goes into polyurethane, and polyurethane, you might have seen the result of Covestro and all these oil company -- all the petrochemical companies has been very strong. So fuel demand was also very strong, which goes for polyurethane. These factors resulted in overall IOD core EBITDA of $99 million in second quarter '21, which is 183% improvement quarter-on-quarter and 243% year-on-year. This is just the beginning, I would say. Our best forging performance is still -- as you can see, we are not happy that core return on capital employed is still 7%, excluding investment in IVOL. This year, it will be to see the full potential of the IOD segment. In second half '21, as I mentioned, we anticipate significant upside in volumes and margins coming from the start of our Lake Charles in Q3. This will further benefit from the continuous strong crack margin in second half, as I mentioned. Today when I speak that ethylene price $0.50, ethane is $0.30, you're talking of crack margin of $0.37 per pound, a very, very strong margin. The outlook for downstream products also remains positive, with continued strength in second half '21 and further going into 2022. Let's go to the next slide. Fibers segments, as you can see, has made a positive start to 2021. You can see we made $72 million in the first quarter and second quarter, we made $65 million, and we'll go through 3 verticals separately. So demand was steady. There are still certain headwinds in this quarter, particularly in the Lifestyle segment because of the COVID. The second quarter, we translated into core EBITDA of $65 million, which is down 10% quarter-on-quarter and up 77% year-on-year. Now let's talk about Lifestyle. Lifestyle is a [indiscernible] business. This is certainly right now negatively impacted because of the COVID resurgence in Asia. As you know, we are in India, we are in Thailand and we are in Indonesia. And Indonesia and Thailand are having the peak. India just recovered from the COVID impact. And we have announced $80 million investment in our JV company, Indo Rama Synthetics (India), which is actually a very, very strong platform on the domestic growth. So you will see the results coming in the future quarters. We expect demand to improve in Lifestyles as economies open up. This is a basic [ necessity ] of human. Raw material supply disruption have affected the industry. However, because we have the PET availability captively has allowed our sites to continue meeting customer needs. So this lifestyle vertical will certainly get benefit in the future. Mobility. Our overall demand has been robust, especially in the replacement tire market. There are 2 tire markets: one is the replacement tire market; another is the OEM market. As you know, the car production is right now hampered due to semiconductor shortage. Actually, the inflation in the United States has gone up because of the price increase of second hand cars, which has gone up by 30%, but I'm sure this will get resolved sooner. So once this is resolved, we have 2 mobility business. One is the airbag yarn business. As you know, airbag is not a replacement. It goes into OEM. Will also most got affected. And now we will see a very pent up demand coming up as this car production goes up. Mobility is expected to improve demand from better semiconductor. So Mobility, as you can see, will be delivering good results as the car production goes up. Hygiene demand has remained steady. Now in Hygiene, we suffered a lag loss. Now let me explain you what lag loss means. As you might have seen, polypropylene in the United States went up from $0.80 to $1.30. Our contracts in Hygiene are based on 4 months previous raw material price. So when the raw material keeps rising, you actually suffer a lag loss. In Hygiene, we suffered $20 million of lag loss in the first half. As now the polypropylene prices will get corrected, we'll recover back this into the fourth quarter. So you will see a very strong result in the fourth quarter when this lag loss is recovered. And this will -- this is very important for you to know, because this does not reflect the real potential of the Hygiene business. So I think I covered all the 3 businesses. We'll be taking your questions later on. I'll hand over to Sanjay to cover the finance. Thank you.

Thank you, Mr. Agarwal. Good afternoon, everyone. I'll cover the quarter 2 financial highlights in the coming slides. Our sales volume grew 7% year-on-year to 3.6 million tons. Our integrated operating model and regional supply chain, which was highlighted in the first section of this presentation, has helped us to meet the demands of our customers. On a quarter-on-quarter basis, it was a 2% decrease because of COVID lockdowns and certain plant shutdowns. And as we sit here in August, well into quarter 3, I feel quite confident of higher volumes into quarter 3 and quarter 4. Revenue increase is not proportionate to volumes as rising crude price implies higher prices for our products. We have moved almost $100 per ton quarter-on-quarter and $300 per ton year-on-year basis, which, of course, then implies that there is an investment into working capital as our cash cycle is around 27 days. Our operating cash flow is around $342 million in this quarter and $545 million in 1H first half 2021. And despite this investment of working capital in the first half, which was around $245 million, the operating cash flows are strong. But with crude stabilizing, I see full conversion of EBITDA into operating cash flow in the second half. Core EBITDA was $477 million, registering a growth of 30% quarter-on-quarter and 59% year-on-year. As provided in our MD&A, IVOL results as it is nonoperative, have been reversed. But for the sake of transparency, it is around $18 million of negative EBITDA, which has been reversed. The reported EBITDA was $552 million, and the difference between the core and reported EBITDA is inventory gains of $55 million; other income from Brazil tax credits of $43 million and a negative of this $18 million IVOL EBITDA, which I mentioned. The Brazil tax credits is something which all the corporates in Brazil have enjoyed. This is something which the corporate -- it's something like a VAT, similar -- something similar in Brazil, which is a gross-up on sale. So the gross methodology was being challenged by the corporates, and [ they want ] all the corporates enjoy this. There's a reported EPS of THB 1.45, which compares to THB 1.04 in 4Q '20 and a flat -- nothing in 2Q '20. Vikash, we can move to the next slide. The next slide is 1H. This is a presentation for first half. Our sales volume grew 8% year-on-year to 7.3 million tons. Revenue increased by -- to $6.8 billion, 29% year-on-year, similar reasons. Core and reported EBITDA increased significantly compared to corresponding period last year for reasons explained earlier. Core EBITDA was $844 million and reported EBITDA was $1.034 billion. And as you may remember that this reported EBITDA achieved in first half '21 is higher than the full year EBITDA of 2020. Reported EPS of THB 2.49 compared with THB 0.06 achieved in the last year. Let's move on to the next slide. This slide talked about our operating cash flows. The finance transformation program and also the COVID event has enhanced our focus on working capital management. There was, at that point of time, not only a need to retain liquidity but also to improve upon credit risk management. And I'm very proud of the team, business team, as well as our corporate team who have worked in this focus. So despite some investment into working capital, our operating cash flows remain healthy and expected to improve in the second half, but selling prices stabilize and we don't have to invest more in working capital. Between the 2 quarters, quarter 2, operating cash flow is 70% higher than the first quarter. Our overall cash cycle is same as reported in the last quarter, 27 days, even though the prices have moved up by $100 per ton. So working capital focus continues to be there. Vikash, let's move on to the next slide. We saw on the previous slide that even in the periods of moderate results in 2020, we continue to generate strong operating cash flows. But what happens during that period with moderate results with events like the one which I mentioned below in the slide, the deleveraging slows down as earnings don't increase commensurately. A phase of strong performance with normal operating cash flows for an accelerated deleveraging and prepares us for the next growth phase. And that's what you have seen, which is evident in this year as well as what we expect in the coming -- in 2022. I expect free cash flows of around $400 million by the end of this year. The net debt equity ratio at the end of Q2 and expected net debt-to-equity ratio over the rest of 2021 and '22 is mentioned here. A reminder to this audience that our net debt-to-equity covenant with our bondholders and lenders is 2:1. Our lenders have supported our growth and continue to express their confidence in our business model as well as our debt portfolio management. Strong balance sheet position. Rating information last year as well as the sustainability focus has helped us diversify our debt profile as well as lower our cost. We'll continue to maintain strong liquidity in the form of cash and unutilized lines. We have lowered our overall cost of debt and have 67% of the debt on fixed versus the USD predominantly covered. The reliability CapEx spend is being monitored cautiously by the technical teams as compared to 1Q '21. In 2Q '21, the maintenance CapEx was comparatively higher by $75 million being spent on IOD entities due to catalyst change as well as IVOL coming back, preparing to restart. We'll move to the next slide, which is on Project Olympus. Our company-wide cost and business optimization program, which is Project Olympus, is well on track. Delivered an efficiency gain of $116 million in first half '21. A run rate basis of $168 million has been achieved, and we are on track to achieve $287 million run rate by the end of this year. Efficiency gains have come from all segments and across various programs. Fibers contributed the most with 69% from the overall $169 million in the first half. This program touches all segments across regions and delivers across business levers like strategic footprint, operational excellence, commercial excellence, procurement and organized for performance. With this balance across segments, sites and across levels, I can easily say that Olympus is not concentration risk. As you may see, procurement and supply chain, sales excellence and operational excellence provide majority of the gains for this period. I should also mention that there's a strong monitoring of the Olympus Program. In one of the previous periods, we have reversed some efficiency gains, which was purely market led. So any savings coming from procurement sales exercise, which may have year-to-year variability is segregated as business partnering excellence and segregate -- and again, differentiated from sustainable cost excellence programs and reported transparently. We continue to engage with leading external experts to bring the tools and practice that will provide effective ways to execute these Olympus initiatives, enabling IVL businesses to achieve their full potential. Thank you. That's what I wanted to cover in my slides. Thank you. I hand it over to Mr. Lohia for the takeaways for this quarter.

Thank you so much, D.K. and Sanjay. We are very pleased with our results for the first half, which is a testament to our frontline employees who have demonstrated their resilience during these testing times. Our managers have demonstrated good agility and leadership to keep the supply chain coming and reliably serving our customers' needs. Our initiatives to empower is showing results as we decentralize and make decisions in the markets themselves. I would like to recap the key messages. We see continued good performance in second half and in 2022. I'm very glad that our Integrated Oxides and Derivatives have turned the corner, with great crack margins and intermediates of Oxyfuel and MEG sectors, driven by higher prices due to crude oil and the cost advantage [indiscernible] by shale gas. The drivers going forward are the start-up of our Louisiana cracker, which you heard from D.K. And as we speak, the start-up is under -- the commissioning is happening and the heating up is going on. Higher volumes in the Fibers and in PET, in Asia especially as the vaccination rolls out and the economies open up. Normalizing of the polypropylene prices, which D.K. mentioned, which will lead to a positive lag, especially in the Hygiene business. Normalization of the semiconductor availability will drive automotive demand and our related businesses. We think our production volumes will be positively driven to replenish the pipeline stocks. Finally, I'm again pleased that our sustainability group is making good strides toward our 2030 targets to lower emissions. Our leadership in circularity continues towards our target of 750,000 tons by 2025. Finally, I again appreciate the strong support that our leadership has demonstrated and in our transformation journey, which continues towards a future-ready Indorama Ventures. Thank you. I'll pass it back to Vikash, please.

Thank you, Mr. Lohia, Mr. Agarwal, Mr. Sanjay. So now is the time for the Q&A. [Operator Instructions] Khun Komsun, I can see your hand raised.

I have a few questions. The first 2 question was directed to D.K. You seem to mention that the cracker margin in the second half will continue to be pretty good. We have seen that ethane price has been now above $0.06 a gallon, ethylene price has collapsed and now jumped back recently. Why is the ethylene prices going to stay high throughout the quarter? And is this going to push IVOL to breakeven in the fourth quarter? That's the first question. And the second question is, you seem to mention about the -- do you think the significant spread diversion between West and East will continue to the second half? And as you mentioned in this slide, moderation of the PET margin. Do you think demand moderations which is going to be supported by the West? That's the second question. The last question is for Khun Sanjay. You're showing the net debt-to-equity ratio continue to decline throughout the next few years, and that will pave the way for M&A activities. What is the headrooms for investment that we're talking about in this scenario?

I'll answer the question on the last question on the headroom. First 2 questions. Thank you for asking this question. First half of this year, the crack margin was $0.32. There are a lot of unplanned shutdowns -- sorry, plant shutdowns in the fourth quarter. The total utilization capacity operating rate is about 82%. And this is where the graph you are seeing this quarter, I think, cash margin. And you can see in June, it went down as there was a -- more plants came up, the demand was a little bit weaker and then you had the plants in [indiscernible]. But in third quarter, and this is -- this slide doesn't cover that. Third quarter and fourth quarter, there are a lot of plant shutdowns in the cracker and which will put the pressure. The ethylene inventories are quite low. These are actually one of the lowest ethylene inventory, and that's why the ethylene spot is trading around $0.50 to $0.52 in Choctaw and $0.47 in [ Noah ]. You're right, the gas prices have gone up on to [ $4 1 million ] BTU. The ethane has gone up to $0.31. But still you like multiply $0.31 with 0.422, the cash cost of ethylene from ethane is only $013, $0.14. So you still will have a very good margin coming in the first quarter of this year. I was still analyzing, as you were asking me. In '22, there are only 2 crackers coming in the United States. And then you have the demand growth, which is coming out, you will see '23 still getting more tighter. So we are very excited about this crack margin. You talked about breakeven -- sorry, Lake Charles, it would have run by first 6 months would have created an EBITDA of $95 million. It's not breakeven. Breakeven is only $0.02, $0.03 crack margin. So extra -- any crack margin translates into the profitability. And you saw the crack profitability in only in Port Neches, where we make 250,000, where we made $228 million, and you multiply by 4, it's $112 million. Divide by 250 is quite $0.28. So all these crack margins, and you have seen this in all the results of Dow and everybody. So it's not...

Okay, let me -- D.K., let me. So we can do this also after the call, Khun Komsun. But essentially, we look at the business on an integrated basis. So our Lake Charles cracker and our Clear Lake IVOL facility. At the moment, in the first half, IVOL lost money, partly because of the shutdown, the catalyst change and partly because it was operating on spot ethylene purchases. So as the IVOL cracker starts up, the combination would give us this upside in the second half. Go ahead, D.K. on the second question.

So you can see here that 28 and 24. This is our 250,000 ton capacity, Komsun, that just for your knowledge. Now coming back to your second quarter, diversion of the spread between Asia and Europe and America in PET. You see Asia, we are saying there will be moderation. Asia was $140, $150. It is just moderate by $10. But Europe and America, because the import parity will remain quite strong, and as I said, we still have legacy contracts in Q3, Q4. So we are not getting the advantage on the entire volume. We are only getting the advantage on the spot businesses. And when we negotiate '22 contracts, which are now going ahead, you will see that those new contracts will be negotiated at higher margins and which will get reflected in '22 earning. So this divergence of the spread between the 2, which is reflected by the container freights and the additional cost, will continue on the duties. Well remember, the duties are also linked to the oil price. So this will remain, the divergence will remain basically.

Let me add to that, D.K. So Khun Komsun, we are -- in our minds, we are taking a sort of approach that when the freight rates normalize, then, obviously, the import parity advantage in the West would have to be given back. But it will get offset because of the high cost of acetic acid for instance. And therefore, the offset we see from the moderation of the margins depends on where the freight rates remain, where the absolute price of crude oil remains. And we do expect it to be offset by better volumes to replenish the pipeline. And -- so better volume due to replenish and moderation of the raw material cost as well. So I think we feel very strongly about the second half. We are not guiding it upwards, but feel that we would be able to maintain our first half numbers, if that makes sense to you. So as you can see, we are deleveraging pretty quickly. And this is -- this has been the track record over the last 10 years. We do investments in bulk when we make an acquisition, but our businesses are mostly serving the consumer needs. And therefore, we have good visibility on our cash flows that Khun Sanjay mentioned to you. And therefore, we feel very confident that we have a strong balance sheet. And therefore, in terms of headroom, we can now continue with our growth trajectory. And as you remember, to give you a larger picture to all of you, especially that we -- our target is to double our EBITDA every 4, 5 years, and we are on track of that. Thank you.

Mayank, you can ask a question now. I can see your raised hand.

Okay. So firstly, I think a few questions from my end. I'll start with the more balance sheet related question, which was asked earlier. I think you talked about the slide on net debt and deleveraging. But quarter-on-quarter, if you look at -- despite the good quarter, there has been no deleveraging for this current quarter. So what gives you the confidence that second half you will be able to delever?

Well, that's quite got straightforward, Mayank. We also admitted that we had to invest in our working capital with the rising crude oil prices. So it's not a big deal.

Okay. So that $400 million reduction target will be on track for...

Yes. And that's not assuming any crude oil reduction. So basically, what Sanjay said is that if crude oil maintains at these levels, then all our operating cash flows will translate into free cash flow.

Mayank, also I think that between quarter 1 and quarter 2 when you were comparing the cash flow also because we bought this entity in Texas, the recycling entity, plus the catalyst change. So we had actually $130 million of excess CapEx in this quarter. I'm just talking comparing the 2 quarters.

And is -- Sanjay, I think is the CapEx related to the IVOL now fully done? Or do we expect more CapEx on that before the start up?

You're talking about IVOL. Catalyst change is done. IVOL is in the commissioning stage, is also done. We are now in the commissioning stage. So it's done.

Okay. And sir, the second question was more related to -- I think the way you're kind of thinking about your utilization rates. If you look at, I think, obviously, second quarter, you did get hit on the demand side because of various reasons. But how are you seeing the utilization rates kind of as we are speaking today? And how are you seeing demand panning out, especially in the developed markets and even places like Indonesia and India where things really got hit last quarter?

Mayank, so Indonesia and Thailand continues to be hit. But India is recovering. So we still believe that third quarter volumes in our Fiber segment, especially -- which gets hit the most, would be better, better than the second quarter. In the fourth quarter, hopefully, would be even better. So typically, the fourth quarter is our weakest quarter. And when we were thinking of guidance and when we're thinking of the second half, we had that in our mind and in our sort of estimates, that what do we expect the fourth quarter this year to look like? And we believe the production, the utilization rates, we'll be able to maintain or improve in the second half, partly to fill up our pipeline and the industry pipeline. So as far as the volumes are concerned, the utilization rates are concerned, we were at low utilization rates of mid-80s in the first half. And I believe we would be at around the same level or slightly better. But the volume we are getting, the new volume we are going to get is from IVOL cracker. We did have the vortex issue in IOD in the first half, which, hopefully, our -- the hurricane season is approaching, but we keep our fingers crossed on that. And therefore, the volume should also come in, in our IOD segment. In mobility, volumes should grow with, again, moderation of the semiconductor supply. Therefore, we are of the opinion that our second half volumes would be better. Our utilization rates will be fine. You made a specific mention that our demand was lower in the second quarter. I do not recollect that. That has not been presented to me. What we have seen is that our sales was lower in the second quarter compared to the first quarter in Combined PET. And part of that was because there was a squeeze in the supply chain, and we could not get that PTA across to our sites in Egypt, for instance, or to India in time. And some of that -- some of the volume stock inventory buildup in Europe, for instance, is because we were running very dry. And a big deal we are making out of our operating philosophy is how to be reliable. We have been the most reliable company in the first half in the West, be it in Americas or be it in Europe, and we want to keep that track record. So we opted to keep some inventory in place so that we can be even better off in serving our customers. Because the vaccination and the rollout in the Europe -- and Europe opening up, European GDP is, for the first time, recovering. So all that will lead to better consumption. And therefore, we need to be prepared for that.

So sir, just a point on that. So if you can kind of help us understand. The average utilization rate for you in the second quarter was 84%. What was it at the start of the quarter? And where are you running now?

Can we do that -- because I don't have that in front of me because we are -- I'm not keeping that monthly statistics. But if Vikash has that, please, or Sanjay? Or we can do it off-line.

I think, Mayank, first quarter was 86%, second quarter was 83%.

[ Received roughly ], start of the quarter to end of the quarter.

So yes, that is a lot of supply disruptions. Right now, we are running, I think, quite high. All the PET plants are running at full capacity. So it's -- we will give you that month by month. So the pipeline inventory is very tight. And actually, there is no demand issue, there is a supply issue.

Okay. And the last question, sir, was more related to the comment you made regarding premiums for 2022. Can you just give us some sense of how the negotiations are and how much premiums, some subjective comment, et cetera? Can you help us with that? And which markets, et cetera, are we kind of thinking about both?

I think it's too early. It's only July and August beginning, but we have started discussions. So usually, what we saw in 2018, our discussions in 2018 in a strong market, led to better negotiations for the '19 contracts. So we are just guiding directionally. That's what we're hearing from our markets. Because disempowerment is going on, we are asking our businesses in the regions to demonstrate agility and start the discussions. So they are telling us that they see good alignment or engagement with the customers, and they believe there would be improvement in the contracted margins. What you see in the first half are not only contracted margins. We have also had surcharges. We had a lot of cost push up on us, but because of the supply demand gap, because of the lack of import, we were able to pass on the cost push and some, thereby improving our margins. So we will have to make a reconciliation for you, Mayank, and everyone, but give us another quarter to do that. By then we'll have better picture on how our negotiations are going.

Vikash, can you just show that regional EBITDA, combined EBITDA? That's a very good slide which shows you. You were just showing earlier. I think, Mayank, this is a good reflection on how quarter-by-quarter, $244 million is the Americas earning. Now this is for the total IVL, which reflects that what is the improvement in Americas. Americas include U.S., Canada, Mexico and Brazil. In Brazil, as you know, we are very large PET producers, same in Europe you see. In Asia, it's 111 per [ 136 ] . So this shows you how the -- and if you see first half itself and you compare, you can see Asia is only improvement of $20 million. So our model of Europe and America, this regional model, pays us significantly. And the contracts are mostly in these countries. It's a, of course, mix of contract in spot, but immediately in U.S. and Europe is contracts. So hope that helps you.

Thank you, Mayank. And well, just to add one information on the second half, the volume growth that we see today is about 8% to 9%, both half-on-half and substantial growth in IOD and both in Fiber as well as Combined PET. So with that, I see Khun Naphat, he was asking a question.

Just a follow-up question on your leverage. If you could update us on the acquisition of Oxiteno, what is the status of the deal now? And I understand that if you are going to fund by debt because you have some financial headroom to keep your covenant below 2x. Are you concerned that the potential resurgence of the pandemic that could affect your operations next year? Okay. This is my first question.

Sanjay, answer that, please. On the pandemic resurgence, I think one important reflection for me and our management has been that 2020, we could see the resilience of Indorama Ventures. And in '21, you're seeing the value creation. And this value creation is because of our resilience, is because of our empowerment of our teams so that they can make decisions right in the market promptly. It is because our integration and our ability to manage the supply chain. There was a good point made by D.K. about how he moved or the teams moved PTA from Thailand to Egypt by -- in bulk rather than containers, where the cost impact was not as significant. And tens of thousands of tons have gone like that. So it's just a reflection on how resilient our business is from a consumer standpoint, and how strong our management teams are developing to show agility to manage the environment. So I don't want to say too much on the pandemic, but I feel comfortable about the pandemic. Go ahead, Sanjay, on the leverage and on Oxiteno.

Yes. So on Oxiteno, Khun Naphat, the only -- we have signed an NDA. So what I can tell you is that we have made good progress and -- with the seller. We can't disclose anything more because of this NDA, but we are progressing well. On the leverage, I think if you just see this slide at the end of '21, even if you sign in the next couple of weeks, closing would not happen before first quarter. If you look at the slide at the end of '21, [ 1.2 ]. What is the headroom? Just simple calculation, $4 billion is the headroom. My BSCR, which is over to requirement is [ 1.1 ]. My repayment profile, because I think you must have heard when this came out, that we already had certainty of financing for this deal. My repayment -- so repayment profile is less than $700 million to $800 million next year. If I have -- if I look at this year's EBITDA without Oxiteno, $2 billion, something similar. Again, VSCR is around -- it comes to around 2:1, more than 2:1.

Sorry, Sanjay, $2 billion, you said something about $2 billion? I hope you're not guiding anything.

No, no, I'm not guiding this.

Come on, come on, come on.

I was just analyzing the first half...

I know that. It's nowhere near that.

I was just analyzing the first half numbers there, nothing more.

I understand, but people have a tendency to think you're guiding. But it's not [ even any of it ]. So...

So BSCR pretty healthy. And as Aloke mentioned before, that operating cash flows, once the selling price is stabilized, this should be significantly higher than what we had reported. So all in all, a very comfortable situation.

The reason that I ask is because when I look at your leverage and I compare it to 2019, when IVL risked capital, and you also had the leverage at about 1.3x, which is about the same level as today. And I understand that your business is quite resilient, and based on your cash flow, it's been pretty strong. So -- but I'm not sure given the size of the deal, and we were going to fund it by 100% debt. And given the uncertain world that we are living today, so I'm not sure that is the way that we will go. Yes, that's why I ask.

Yes, we understand. But I would want you not to worry about that. It's a good slide of view in front of us. So our fourth quarter '19 leverage was one time. And at the moment, when we come towards the end of the year, we expect it to be less than 1.2x, with a very strong environment in front of us. So I think we would be -- we will be below the second quarter '20 number that you see of 1.5. And that is what -- when the news broke out from Oxiteno, and we had to admit, we said that we feel comfortable with the deal and we feel comfortable with that debt. And it will be below 1.5.

Okay. My second question is on the near-term second half operational outlook. Because in the MD&A, you mentioned the positive guidance in the second half. Just now you also mentioned about the volume growth in the second half coming from IOD, and we also will be planning to start-up a gas cracker and the MEG operations is also coming back. But when I look at your PET spread, it's actually coming down quite substantially today, maybe in Asia, it's at about 200. And first half, we are getting at about 2 40, 2 50 per ton. And I -- given your EBITDA today, it's still majority coming from the PET. I wonder if the softening spread will make you achieve your target that you are aiming to get the second half as good as the first half.

Yes. So that's a fair question. But I think there's an overemphasis in your mind with regards to Asia benchmark spreads. Because for us, the driving force for us is the rest. And with high crude oil prices driving absolute import parity adders and with continued strong container costs, we are actually underselling in the West. In the past, when the world was more normal, we would have a significant premium on import parity. But today, because the import parity is moving up so quickly, we are selling below import parity. So if you can imagine, as the import parity moderates, our premium will go back up. And as in the previous question, you're talking about '22 targets and '22 contracts, we expect our contracts for '22 to lend up at a better adder than it did in '21. So I would really wish you to consider that Asia benchmark margins only have a smaller impact on us. And I've heard this from Vikash about the markets getting very, very -- talking a lot about Asian benchmark margins. But in the whole of IVL, it's maybe 10% of IVL. We have -- the IOD business is going to be so much more significantly impacted upwards. The 10% Asian business, whether it's $10 lower or $20 lower is not of significance. We would like -- we should be working with you to understand that better. It's in West where we have our strength. We have all the leadership in the West. We got nobody in Asia.

Okay. My last question is on the insurance compensation because now that we are talking to the insurance companies about your claiming the insurance on the lightning of your cracker last year. If you could give us the -- how much have you already received the compensation and how much do we expect to receive in the second half?

Go ahead, Sanjay.

Yes. Khun Naphat, we expect additional money between $60 million to $70 million. I'm speaking on -- in terms of [indiscernible] terms. In Q3, Q4, it could specifically be actually Q4 because there is a meeting arranged with the underwriters. We've already received around $15 million in the first half, but it's a significant amount of money, which would come in second half. I'm not able to kind of commit for Q3 because the meeting is fixed for September, but definitely in second half.

Thank you, Khun Naphat. Anybody? [Operator Instructions] I don't see any questions in the chat room also.

Vikash, can I go ahead with a few more questions? Mayank here.

Yes, Mayank. Please go ahead.

Sir, just a few follow-ups in terms of your commentary around the industry. I think, as you're rightly highlighting, there are concerns around Asia demand and Asia margins. Can you just give us a sense in terms of what you are seeing in the market in Asia in the last couple of months? And what are you -- what has changed over in the last couple of months even versus in August? If you can just give us a sense of what you are seeing in the market?

D.K., please.

Yes, Mayank. So like Mr. Lohia was mentioning that this slide is important for you -- all of you to look at this, which shows what is our Asian impact here on the total EBITDA, right? This is combined all verticals, right? When we look at the combined -- we don't look at PET spread alone. Integrated PET spreads. I think the first quarter was $232, and the second quarter was $222. And actually, today, as we speak, PTA margins have gone up, and we are still at $215, too. So the PET margin came down by $10, but PTA margins have gone up by [ $0 ]. We always look at integrated PET/PTA margin. So there is not much destruction of the margin, $5, $10. But as Mr. Lohia was mentioning, most important thing is what is in the United States and Europe. And that is driven by import parity. Container stakes to Europe today is $9,000 for one container of 22 tons. Brazil is $11,000 per container. And this is continuing and it's not likely to ease based on the availability of -- so this is what you need to consider in the larger picture.

D.K., I would put it differently. Everybody knows the container freights. That's not the issue. The issue is that in Americas, we have a large exposure. Brazil, in the middle of the year, is in winter season, so it's off-season at the moment. So in Brazil, we should see a better demand in the second half. And there's a 12% -- is it 12% or 14%?

[13%].

So you will have to take that into consideration, that imports are not competitive, we are selling below import parity. So there's room for us to improve the pricing as -- even if the import parity comes down going forward. They cannot premium.

So you think like this. First quarter, Asia integrated margin and second quarter was marginally same. But you can look at the American profitability, right? Of course, this includes [ some tax ]. The paraxylene integration we have in America that also benefits us. paraxylene margins have gone up. Everything value chain margin benefits us in the Americas. So 150 to 244 is a big driver of Combined PET. And similarly in the -- you see in the EMEA. While in Asia is only 111 to 116, of course, this is a combination of fiber and everything. But fiber, as you saw, the lifestyle is slightly lower. You have to look at -- and as Mr. Lohia was rightly advising, don't look at the Asian PET integrated margin. That's one benchmark. More important is what do we sell in Europe, what do we sell in United States, Brazil, Canada. And that's where the overall demand is very good. All these are deficit markets. Europe imports 850,000 tons of PET as a total EU 28. United States, excluding the -- I mean, North America imports about 600,000 tons PET. So these are deficit markets.

Fair enough. Then just riding on this point, can you just tell us how is the competition with Chinese players, kind of how are you kind of seeing that come through?

Of course, a good question, Mayank. The Chinese are rewriting the crude to chemicals industry, right? They're highly integrated. Whether -- but this is more impacting polyethylene, polypropylene. Aromatics business, of course, they are importing 13 million tons of paraxylene, which is going to go down. MEG, they import about 10 million tons, that is going to go down. But the positive note is the policy growth in China has been strong. So -- but they are not coming out as a big exporter of PET. Today, still they export about 3 million tons, 2.5 million to 3 million tons, and the container freights from China is making even more difficult. So Chinese domestic industry is really rationalizing. So smaller plants are shutting down, bigger players are emerging, bigger and bigger, stronger, Hengli, [ Ixeng ], all these players have become very, very strong because of the integration. So yes, if I had a plant in China integrated, I will be worried more because that's the competitive landscape, which is changing.

Okay. And sir, the last question is more related to the cracker in the U.S., which you were supposed to start-up in August. Obviously, they have been multiple slippages now. So what confidence can you kind of give us in terms of helping that ramp up? And what gives you the confidence that fourth quarter would be a full run rate on the cracker?

Let me go back into the history of that cracker. So when it got shut down in July, August last year, we said we restarted in Feb. At that time, we had our new management from Spindletop join us. We asked them to look at the cracker -- they were looking at it already. They just joined IVL. As they went deeper into the Louisiana cracker, they said there are certain parts of the technology in certain way that we build a cracker that makes it very -- how do we call it feeble? Not feeble but the smallest of disruption...

Sensitive.

Sensitive, yes. So smallest of sensitivity will bring the whole cracker down. So we get the permission to spend money and to harden the site. And therefore, we have taken another 6 months to do that. That's one confidence. So it's a confidence in our team. Basically, we have a new team. And I hope you would have seen that over the last 20 years with IVL, it's about team, it's about our people. And we have a new set of people. I spoke to them day before yesterday that I'm going to go and commit this to the markets. Are you okay? Are you fine? They said, yes, the chimney is on, the boiler is on, you can go ahead. So that's all I can say. You can wish me good luck on it, but that's it. Close end of the month, we can again have a chat where we are.

Thank you, Mayank. And thanks, [ Binit ] and [ Ahmad ] joining from Nomura. So [ Binit ], I can see that your hand is raised. Can you please go ahead and ask your question?

So this is more of a big picture view. So as far as I understand that about 19% of the global plastics production is recycled at the moment. And this has seen a gradual increase over the years. So from the perspective of chemical players, how do we see this cannibalizing into demand in the long run of -- as the recycling increases over the years, so how does it affect the demand for the chemicals in the longer run?

Yes. Let me answer that. Thanks for that question. It's a great question. Just the clarity of PET is what makes PET such a standout plastic? And it can be mechanically recycled. So that's a big plus point because when you talk about chemical recycling, advanced recycling, those are things that are still being researched, even I would say. So they are many years away. In our case, with our mechanical recycling, our challenge is not the circularity, but the collection of the base. And that's where we're putting a lot of focus. We are building a great team. We have the assets in place. When we look at the assets, what we are buying, we are looking at it also from the supplier point of view that do they have a base supplier. Are we strengthening our network on purchasing base? It is something like 10 years ago when we were looking at buying PET assets. You're not buying PET assets, you're also buying the talent with the business. Because that talent had the end growth into the customers. So we were acquiring a customer and the asset, of course. So over here, if you can vision it, we're acquiring recycling facilities, but we're also acquiring base suppliers. So recycled PET will grow at a much rapid pace. The virgin PET will grow at even low single digits, I would say, now. And PTA itself would probably grow at 0 rate because if margin is growing at 3% and recycled is growing at 15%, it doesn't give much, much room for PTA, which is a single-use product. Where PTA would grow is on the fiber side. So on the fiber side, which is, as you may know, maybe 2.5, 3x bigger industry than PET. That would continue to grow. And polyester within the fibers is the strongest market share. So it keeps getting market share over cotton, for instance. So that's where PTA growth will come from, not dependent on PET, but on PTA. So the growth rates are going to -- for virgin, growth rates are going to sort of come down. But in terms of our business, you said this is a larger question for IVL, let's say. And that's why we are spreading our wings. Initially, we spread our wings to the West as a whole, then we spread our wings into fibers, into HVA. Now we are spreading our wings in IOD, Integrated Oxides and Derivatives, and downstream of that into surfactants. Hopefully, that gives you some visibility on how we are looking at the next 5 years.

Thank you, [ Binit ]. [Operator Instructions] I don't see any questions at this time. Okay. It seems that we are right on time. And thank you, everybody. Thanks for joining us and stay safe. And if you have any questions, please do contact us. Thank you.