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

A very good afternoon, everyone, and welcome you to Indorama Ventures' First Quarter Results Meeting for 2022. I'm Vikash Jalan, Vice President of Investor Relations and Strategic Planning at IVL. Joining me today, Mr. D.K. Agarwal, our CEO and CFO; Chris Kenneally, Executive President for Fibers business; and Alastair Port, Executive President for the IOD segment. And thank you, Alastair, for joining all the way from the U.S. and being with us today in the meeting. So Mr. Agarwal and Alastair and Chris will take us through the prepared presentation, and then we will open up for the Q&A session. A quick disclaimer that this meeting is being recorded, and a replay of this session will be available after the meeting on our website. We've made a few assumptions and forward-looking statements, which are, of course, available based on the future industry trends at this time and our analysis and available information that we have at this point in time. So with that, I invite Mr. Agarwal to start the prepared presentation.

Thank you, Vikash. First, let me welcome you all in person on this first quarter results. So we really appreciate you being physically present here. Thank you very much for that. So IVL has achieved a very record performance this year, with core EBITDA of $650 million and a reported EBITDA of $784 million, the difference being the inventory gain as the crude oil price rises, that as you've seen in the past whenever this happens. This translates to a reported earnings per share for this quarter of THB 2.47 and on an LTM basis of about THB 5.98, which shows you the strong results of the company. Again, our portfolio is proving its resiliency. I think this is the most important that how resilient is our product portfolio even crisis after crisis. When we say crisis after crisis means after pandemic, after Russia-Ukraine crisis. And what is the core reason for this is because we deal in daily necessities. We sell the products that elevate your safety and well-being, and that is demonstrated in the last many quarters of results. If we look at it, what is the driver of this quarter's results? There are 4 reasons, and we'll take your questions as this comes in. The rising crude oil levels; the higher is the crude oil, our IOD business gets benefited because of shale gas advantage. And you will see that MTBE is very, very strong now. Second is the heightened ocean freight rates. Because we operate in the Western world where the pricing is based on import parity and those are the deficit markets. The strengthening dollar, you may wonder what does dollar has to do with it? Dollar is our currency in which the margin is determined. So emerging currencies like Brazilian real, even you have seen Thai baht weakens, our cost is based on those currencies, Mexican pesos, Turkish lira, all this. So that reduces our cost. And the most important part is the demand, how the demand looks like, and the demand is still very strong because the world is opening up. All the COVID restrictions have gone and you can see Thailand opened up, Singapore, Europe, and everybody wants to come out of the cages. So post-COVID opening of economies is another very, very important. If we look at another important -- you saw the result, CPET has an additional boost this year. We have been telling you that we had reset the PTA/PET contracts in the Western world at the end of '21, which got translated into the earning of first quarter '22, and these are annual contracts which has been set with the customers. The Integrated Oxides and Derivatives business benefited from shale gas economics in the high crude environment. Although I know that gas prices have gone up $7 a million BTU, so we did have impact of higher costs. The energy crisis has, of course, been the most critical in Europe where we had additional impact of nearly $30 million in the first quarter, but that was recovered from the higher pricing. IVL's Our PET and Fiber operations have suffered higher energy and utility costs resulting in additional $36 million in the cumulative energy spend in first quarter '22 over fourth quarter '21, and that's what was required. In these times, what is important is the agility of the management, how management looks at supply chain management, how do you make sure that the pricing is rightly done, value pricing. And I'm very happy that our entire management has responded with agility by increasing energy hedges and levying surcharges to partially recuperate the cost -- recover the cost. And that's what is important in this time of management agility. The Russian-Ukraine conflict has, of course, put inflation in the energy prices globally, and we believe would have its peak impact in second quarter '22. Since forward curves are showing a tapering, well, that's nobody's guess, but right now we have well hedged our European energy. Second quarter European Energy is pretty flat as first quarter. We don't see any additional impact in the Europe. The Project Olympus continues to be well on track and the organization is making very good progress, achieving an annual rate of $444 million in efficiency gain in this quarter. So that's the run rate. This means that, that is with reference to 2019, what additional value is getting unlocked. Now let us move to the next slide. What is the major macro themes impacting IVL? These are the 4 graphs you see in front of you. The most important, governments are beginning to lift the strict measure. I think people have realized to live with COVID. I don't think there is any solution now. The world, different, different strategies were followed. Now COVID is having its impact in China. So opening of the economies post pandemic. This improved global mobility keeps demand for our product portfolio very healthy. And as we go into the seasonal second quarter, the PET still remains very, very tight globally and the seasonal demand kicks in. As the rest of the world opens, China is seeing its worst lockdown since 2020. You might have heard that polyester operating rates have come down in China, which has actually impacted the MEG and MEG margins are one of the worst margins in history, only $110 over naphtha. And that got reflected in our first quarter results. The other part is the freight rates. I was listening to the Merck CEO's commentary on CNBC, that 12% of the world's shipping company is basically -- capacity is reduced because of congestion at the ports. And that's not going to ease so easily because last mile delivery, shortage of drivers is another problem. So the freight from, as you can see in this graph, Asia to West has heightened resulting in high import parity pricing and a strong IVL margins in the Western markets. As you have seen, the reasonable breakup which we have given. Today, 2/3 of our business is outside of Asia, and that is reflected in earnings of those Western world. Coming to the currency part, as I mentioned, IVL's portfolio products are priced in dollars, and the strengthening of U.S. currency has a positive impact on the business. In fact, a strong U.S. dollar reduces the conversion cost in emerging economies such as India. Indian rupee has become INR 78; Indonesian rupiah crossing IDR 14,500; Brazilian real, although the interest rates have gone up, but again starts weakening; Turkey and Egypt, Egypt has had recently a devaluation, where IVL has a strong local presence. So our costs in those countries in dollar terms comes down. With recovery in demand and supply disruption, crude oil price has seen its highest level since 2008, and this is a boost to IOD's shale gas advantage, especially our MTBE and MEG business, but you will see in MTBE, when Alastair will present, that MTBE margins are very, very strong. One of the reason is purpose-made MTBE in Europe is pretty expensive because of high energy costs, so demand-supply is very tight. We believe the supply chain's tightness will continue with low inventories in the pipeline and the Russia-Ukraine crisis will continue for the foreseeable future, keeping crude price elevated. I mean, you know the developments what is happening in the crisis. The gradual global recovery with COVID-related shutdown easing has overall positive sentiments for IVL's business. So this gives you a rough idea of the 4 major factors which impacted the results in the first quarter of 2022. Well, the most important, as I always say, people, people, people. One number on assets is our people and the results we achieve is due to their dedication. We are organized into 3 segments today. Chris looks after the Fiber. Alastair looks after the IOD. Sanjay went from CFO to CEO of PET, and they have the responsibility of the bottom line. The way the organization is set up is aimed to allow for straightforward and streamlined leadership. It allows management of each segment to be accountable and responsible for their business with full ownership. And that's the game. As you know, we have a very strong management information system. We monitor our return on capital employed at each entity level. On to the next slide. After the successful 2021, now look at the results. I will begin 2022 with a new record in quarterly earnings, achieving $650 million core EBITDA, representing an increase of 40% quarter-on-quarter. As you can see, the volume increase is from 3.7% to 3.8%, only 1%, and revenue is $4.4 billion. Of course, this is linked to the crude oil price versus $4 billion. So that is a reflection of the crude oil prices as well as the margin improvement. Growth comes from all the 3 business segments, Combined PET, Fibers, and Integrated Oxides and Derivatives, as well as across all the 3 major regions of Americas, EMEA and Asia. Our product portfolio continues to play a very crucial role in the consumer's daily life, serving an application focused on elevating safety and well-being. This is the real cornerstone of IVL's resiliency and has allowed the company to successfully weather volatility and uncertainty and the management actions which we have taken. As you can see, the core net profit of THB 10.6 billion, which is a significant improvement, quarter-on-quarter 94%, year-on-year 175% improvement. The operating cash flow is about $548 million, 145% improvement. As you know, we deployed additional working capital due to high prices, 173% year-on-year. The core earnings per share is about THB 1.85, again a THB 0.91 improvement and THB 1.20 improvement versus year-on-year. Core return on capital employed, which is a very important yardstick for us, has gone up to 19%, a 6% improvement over quarter-on-quarter and 9% over year-on-year. The core return on equity is about 28% versus fourth quarter was 15%, an improvement of 13%. It's very important also to look at reported financial figures. Our reported EBITDA is $784 million, which is an improvement of 67% quarter-on-quarter and 63% against last year. Reported net profit is about THB 14 billion, record profit, 161% improvement. And the reported earnings per share is THB 2.47 versus THB 0.93. So very record profit for the first quarter, and we are pleased to report that. Next slide, please. I think always the concern arises, what's going to be the volume, what's the demand, how the market is shaping up. You can see that our capacity utilization in first quarter was 89%. We had 2.7 million tons versus 2.6 million tons in combined PET. And this increase in volume was due to normalization of operations in Brazil. This was in spite of our planned turnaround at AlphaPet. IOD, there was slightly lower production because of unplanned turnaround in Clear Lake and planned turnaround of LAB and Fiber volume remains constant. So IVL's geographical diversity continues to be an important advantage in providing resiliency to geopolitical risk, while our regional business model allows us to better manage the supply chain disruption. And I think this is the winning formula of having geographical diversification when the supply chain gets disrupted. IVL is able to keep good service levels with our customers. And let me tell you, today, customers are looking not for product, they're looking -- making sure that there is a reliable supply, reliable partner, and we see a lot of regionalization happening. But we don't stop here. One important driver for IVL's strategy is growth and the constant fear that if we don't continuously grow, we will decline. And as you know, IVL has demonstrated how to do acquisitions, integrate them. This is why IVL continuously invests in volume growth, improving the reliability of our assets, and improving on operating rates. The second quarter outlook, we expect to be 4 million tons volume with Oxiteno addition. So let us look at the combined IVL EBITDA. As I mentioned, $650 million versus $460 million -- $462 million. So it has grown 77% year-on-year and 41% quarter-on-quarter. Growth has, of course, come across each of our 3 segments, resulting in a record quarterly performance. The high energy prices in the United States as well as Europe impacted our business, predominantly in Europe, and our leadership was able to effectively manage these issues with passing on the surcharges and better margins. The gradual recovery with COVID-related shutdowns easing is overall positive sentiments in the IVL's business. Today, we can say, IVL has 3 strong interlinked segments. And on a regional level, if you see, this is the regional chart where we show you how the regional is. On a regional level, growth can be seen across 3 major regions of Americas, EMEA and Asia. Approximately, this is another very important driver for IVL. 2/3 of IVL is situated in West, benefiting from heightened ocean freights, higher import parity and resetting of the contracts. Alastair will cover the Oxiteno. The recent completion of Oxiteno will bring further strength in the Americas, especially Latin America. Our geographical diversification has been one key competitive advantage in being a reliable supplier, especially in turbulent times as we see today. So you can see here, and the outlook, of course, Western markets will continue to benefit from reset of PET/PTA contracts and Oxiteno, which is running at $55 million to $60 million EBITDA quarterly, will get added into the second quarter. So that will further enhance the Western business EBITDA. So you can see, Americas constitutes $330 million out of $650 million total EBITDA, and you can see a significant improvement in Europe from $58 million to $120 million. And that is because of the reset of the contracts in Europe also. And Asia has been $196 million versus $167 million. So this gives you a good visibility on what is the driver of the IVL earning, in which regions, segment wise as well as region wise. Next slide. On this slide, now you see the bridge from fourth quarter. So fourth quarter, our core EBITDA was $462 million, and we achieved now $650 million, inventory gain of $134 million. As you can see, the margin is $149 million, which is significantly coming across portfolio, but mainly driven by reset of Western PTA and PET contracts. Volume growth is mainly driven by, as I said, Brazil got normalized, start-up of Lake Charles, and the Brazilian facility. Although I mentioned to you that AlphaPet has a planned turnaround, which will get normalized in the second quarter. And you can see the variable costs got hit by $28 million, $36 million got impacted by energy prices in this quarter versus... So this gives you a bridge of fourth quarter '21 to first quarter '22 and the inventory gain was $134 million. Next, please. Well, the star has been CPET. CPET has seen growth of 67% year-on-year and 63% growth quarter-on-quarter. This segment has achieved, as you can see, 15% EBITDA margin in spite of high prices. So always, we look at EBITDA per ton, and you can see core EBITDA per ton has actually increased by 50%, $101 to $158 per ton. Our return on capital employed has gone to staggering 33% versus 18% in fourth quarter '21. How it is coming? Over the years, we have created one of the most efficient business model with Combined PET having a leadership position in the world. We are able to serve our customers across the globe reliably and we have a very strong integrated and geographical portfolio, which cannot be beaten by anybody. 2022 will have the full benefit of the recently completed Vietnam Packaging acquisition, a leader in the country. Further, we are continuously focused on expanding our HVA and recycling portfolio. This will be the major growth driver over the next years. And we have created a unique model for the Integrated PET portfolio. Now this slide gives you the Western market share and also gives you what sort of volume it is. And it also tells you quarter-by-quarter what is the industry spread and IVL spread. And you can see that the graph is widening, because the lighter, which shows the industry China FOB, is basically a Chinese benchmark, but our premiums are due to sales in the Western market where we command premium, as well as in Asia, and particularly very lucrative markets like Japan, domestic Thailand, Indonesia. So we have created a unique model for the Integrated PET portfolio, enabling us to command strong margins over the industry. And the most important, 2/3 of the portfolio is located in the West, which enjoys premium pricing, as I was mentioning, over Asian benchmarks. And this year, we see an additional boost from resetting of the contract and high freight rates. The business is beneficiary of high crude oil levels. And this year, we are seeing even Asian spreads increase in line with oil. So although, as you know, because of COVID, the Chinese domestic demand has gone down, but the export from China remains limited due to the COVID. And worldwide, we see that the inventories are pretty, pretty low. And even in April, the spread remains pretty strong. Next slide. The sustainability team continues in full force. We are on track on meeting our 2025 targets of 750,000 tons in post-consumer recycled PET and continue to study further opportunities. As you remember, in 2030, we have vision, we have given that we want to do 3 million tons, and this is because of the unique nature of this polymer. On the right-hand side, you can see how the recycled PET prices compare with virgin PET prices? And you can see that in spite of high virgin PET prices, recycled PET commands a significant premium. And this shows the commitment of brand owners towards circularity, because it doesn't move the needle in the overall packaging cost of the brand owners. So the recycling investment which we have done, which will start churning money in coming quarters. We strongly believe in PET. Over the alternatives given, it is a material of choice, no doubt, for sustainability and affordability sentiments equaled by our global customers. Going forward recycled PET will play a larger part in IVL's sustainability drive as we expand our mechanical recycling capability globally, invest in advanced recycling, and thereby enlarge the portion of our feedstock coming from recycled sources. So you will see, as we are expanding these recycle facilities, creating to scale, reducing the cost, the profitability will keep improving. Next slide. So now I will hand over to Alastair for covering the IOD, and then we'll come back to the summary. Thank you.

Good afternoon, everyone. Great to see everybody face-to-face. And thanks for inviting me over, D.K. So I'll go through the IOD first quarter 2022 results. I think the first point of note, year-on-year, 258% increase in our quarterly results, which is a true model of, D.K. mentioned people, it's all around people. It's attention to the roles, it's attention to pricing excellence, and attention to safety and reliability of our sites, and that's great to see. And it's probably the third quarter in a row that we've had nice sustainable earnings in IOD. So again, very good to see. 3% quarter-on-quarter, as I'll come to, a good rise in MTBE margins that came through in Q1 and sustaining today. And we also had an LAB shutdown, as D.K. mentioned, in Q1. So that affected downstream, but LAB is back online now and we're expecting a good Q2. What is our basis? So utilizing cheap U.S. shale gas play. As you know, we've got 2 ethylene crackers. We do buy ethylene, so we take advantage of good ethylene pricing in the market, about 100,000 tons a year, but we're a very integrated player, all the way from ethylene through EO and then downstream into surfactants. And as I'll come to a little bit later, you'll see the breadth of markets that surfactants move into. IOD obviously is also linked to our brothers in CPET and Fibers through MEG. So whilst MEG margins are slim today, a lot of our MEG is captured into both Fibers and CPET. So that's a good integration. Our Lake Charles ethane cracker is commissioned. It's running well. As I said in the last previous calls, Q1, Q2 is all about understanding how to run the plant, getting it stable, getting the reliability up and getting the training up. And I'm very pleased to see all of those things happening, and therefore, that plant is becoming more and more reliable and more and more of a good asset for us. MTBE, strong performance. This quarter, demand for gasoline is up. I'll cover that in a future slide. But you'll see good spreads. And I did mention on the previous call, we're fairly bullish on MTBE. We were quite right to say that at that time, and we saw it coming to fruition. MEG, the weak point of the quarter. As D.K. mentioned, lockdowns in China affecting polyester demand and, therefore, MEG demand short-terms rising in China and hopefully coming out of lockdown soon to get the whole apparel industry moving. Downstream portfolio. In Q4, we benefited from a lag from our pricing contracts. And in Q1, with higher ethylene price, we got a negative lag and we'll get a positive lag in Q2. So nothing to be concerned about there. It's just the phasing of the contract formulas. I think the future of downstream, as you know, we closed in Oxiteno, D.K. mentioned that on 1st of April. So you'll see in the Q2 figures Oxiteno coming through, performing very well as a unit, a very good purchase for Indorama, and I'll talk a little bit about the integration in the future slides. Next slide, please. Okay. Let's talk a little bit about MTBE. So those have been with us through this journey since 2020 on MTBE. So the squeeze on MTBE through lack of mobility around the world with COVID, a reduction in oil price, primarily due to COVID. And therefore, we squeezed the margins. Too much supply, not enough demand. And you saw the effects through 2020, and a recovering position in '21. And the back end of '21, you started seeing oil price increasing. We started to see mobility starting to increase. And then as we moved into Q1, we've got good mobility, except for China at the moment, but around the world, good mobility. Anybody that's been on a plane lately can see the world traveling, the airports are full, cars are moving. Bangkok is full, as I saw during this trip. And gasoline is being used. I think we've also seen the effects, as D.K. mentioned, of the Russia-Ukraine crisis. We've seen a run-up of oil. And that helped spreads as well. And it is an oil-based product. So you've got 2 main effects on the pricing. One is higher oil pricing coming through, higher gasoline pricing coming through, and then a supply-demand crunch on MTBE now, which is getting a good margin MTBE above gasoline. So you've got those 3 factors all working in sequence. And as you can see now, pricing on MTBE is probably as high as I've ever seen it in my history since 2014. And is it sustainable? We'll see. What's happening currently is you've got butane. Butane was very high last year, if you remember, not enough gas wells in America. And now there's a high demand in America for all the NGLs and ethane, et cetera. So the gas wells have been reopening. I think there's a backwardation on butane. We're just about to enter driving season across the world. And we've also got to the hotter season. So there's less blending of butane into the gasoline pill. So we're seeing backwardation on butane and continued strength into MTBE. So margin should stay strong. Next slide. Around the MEG spreads, very different story. We maintain a shale gas advantage over Asia. Very high oil price in Asia, as you know, so not the base economies. Their margin spreads are getting thin. We've still got strong margin spreads in the U.S., but overall, it's below where we'd like to see it. And I think the message here is, as soon as China starts opening, as soon as the polyester demand starts increasing, we'll see MEG starting to flow around the world and spread should start to improve, and then we'll take advantage of our shale gas advantage on top of that. Next slide. So talking a little bit about Oxiteno. Very strong first quarter, obviously getting ready for us to buy them, and that's good to see. The strong performance in their downstream business, very high demand, very similar to IOD. We're seeing very strong demand across our downstream business in all of our sectors. Oxiteno has seen the same thing in Brazil. And it's good to see Pasadena working very well. That's the $4 million you see in the top of the chart on Q1 moving from a negative margin plant to a positive margin plant. So as we start loading Pasadena up with our products and now we're integrating in the U.S., you're going to see a pretty profitable plant there that has been historically a drag on Oxiteno's earnings. So that's great to see. And I think other parts that we've seen is all the plants getting full in Oxiteno. That's great to see. I'll talk a little bit about the integration story. But I think the main message that we've got is we've got a very successful business immediately accretive to our EBITDA earnings, a good ROCE. I think in Indorama, we feel a very good buy on our part. It's going to be immediately, as I said, accretive. Very good synergy is going to come up out of that and very good growth profile and similar to IOD. So very pleased with that, and I'll talk a little bit about more of the integration. Next slide. Just a couple of slides around IOD. So just to remind you, for our downstream business. So when we think about downstream, it's about 50% of our product volume, especially now with Oxiteno on board. It generates about 70% of our COMA. So it's a very, very important business segment for us, and just strengthened, double the capacity and breadth of innovation that Oxiteno is going to bring really makes that a valuable downstream business that has quite a lot of specialty chemicals in there. The part on this slide that's worth pointing out is, look, it's a megatrend business. We produce products that we, all in this room, use every day, stretching from home cleaning, whether it's laundry, whether it's floors, whether it's detergents, whether it's dishwashing, we all use those products. And certainly in the Americas, we're in 1 in 4 of the Americas cleaning products today as a combined unit. When we think of personal care, so shampoos, conditioners, body washes, we're very strong in those as well. Our products bring in effect. So as you get in the shower or the bath, and you get that lather on your body, or you get that toothpaste in your mouth and you get the foam, think of us. That's us. And so very meaningful to the home and personal care market, and that's, as I said, a megatrend, good growth patterns, 4% GDP expected growth. The world is getting more developed. It's getting urbanized. Populations are growing. People want these sort of products to improve their daily lives. And therefore, 4% is global. U.S. is still strong. U.S. is about 4%. We think Brazil is growing stronger than that. India is growing very strong. They're up at 10% or 11%. So a very, very attractive market. In terms of coatings and resources. So this is the breadth of products that we have around fuel and lubes that go into engines, coatings that go into paint products, both in home and industrial. Very important market. Oxiteno is very strong in that. They're stronger than IOD was. So we're going to grow that market quite significantly. When I think about resources, I think about mining, I think about the fuel and lubes. We're strong in that, and therefore, we'll bring some strength on the Oxiteno markets in Brazil and South America. And then when I think about crop solutions, very, very important to all of us in this room to keep eating. You've seen the price of food and crops around the world, going up, especially with the Ukraine crisis. What that generates is the demand for high yields in other crop producing nations becomes even more critical and high yields is generated by chemicals and surfactants and active ingredients, reduce the weeds, improve the growth, reduce the insect population. It's very important to get those high yields. And therefore, our products are very key to all of the big producers you see down there, the Bayers and the Syngentas, very, very important customers to us, but we're very, very important suppliers to them. And Oxiteno has a great set of products to them --- to that market, we have a great set of products. So I think what you'll see is a very combined business that becomes very meaningful, especially in the U.S., but will become more meaningful in Europe, in India and in Asia. Next slide. So how are we doing with the integration? So we did a few things over the last few months pre-close. One, we obviously had a great due diligence report leading into this. Very, very thorough, went into a lot of detail. Two, we had a lot of great conversations with the management team, very synergistic. We actually asked Oxiteno what their list of synergies would be if they thought about acquiring us. And their list of synergies were exactly the same as our list of synergies. So you've got 2 sets of people thinking side-by-side and like-for-like. And therefore, that's a good starting point to unlock synergies where you're already up and running. The third point is we had a clean team. So we could see this information of people from both sides of the organization with some consultants to get a head start on some of the commercial operations and commercial unlocks that we could do. And what you're seeing there in this slide is the types of areas that we're going to be looking at, and I've already identified some of the quick wins. So one is cross-sell. So which products can we take to which markets? So I think we can take some Oxiteno crop products to our markets. We can take some of our ag products to their markets. That's a clear cross-sell. Coating, they're stronger in coatings than we are. So America, Asia, big coatings markets. We can take their products into our markets. Fuel and lubes, big market in Brazil. We can take our products, our LAB sulfonated into South America. Another good example would be mining. We've got great mining products in IOD. Big mining industry in South America. So you'll start to see some cross-sells of very clear market developments and products moving around the organization. The second thing you'll start to see is footprint optimization. So we're 2 independent companies pre-close. We come together. They make some products, we make some products. They have some assets, we make some assets. They have different regions, we have different reasons. So as we bring those products together, move them around the footprint, we're going to optimize what goes on. We don't have to make every product in every region. We can move products around. Some of the technology is different that they have. They can make some things better than we can. We can make some things better than they can. So you'll see a lot of products starting to move around, and that will unlock capacity. With capacity unlock, we're going to bring more products to the market, but we're also going to satisfy our customers in a better way. We're going to be local to the customers, we're going to have plants local to the customers. And I think as we've talked through the various trade meetings we've been and customer meetings we've seen, they're super excited about this because we could do things we've never been able to do before on both sides. So they see a lot of value unlock there. Vertical integration. We have LAB, we have sulfonated LAB. They have sulfonation, we have LAB. Put them together, we're now integrated. Pasadena, as you know, was land locked. Bought their EO, we have EO. So we're immediately an integrated operation in the U.S. So it's great to see some of those things going through. Alcohols is another one. They make their own alcohols, we buy alcohols. Innovation platform. Really, really exciting to see this. One of the areas I've really wanted to improve in IOD was our innovation offer, how many products we're bringing to market, how sticky and relevant we're going to get to our customers, how can we bring products that have more pricing power on them, how do we move to more of a specialty. And Oxiteno has some great products that serve our market well, as I said. And I think as we've looked at the 2 innovation platforms, about 10% of the projects they were working on in innovation, we have a solution. And about 10% of the projects we were working on in innovation, they have a solution. So we've immediately brought to market a huge volume of products that satisfy our customers without doing anything. We just got the answer now. So that's great to see and there'll be more of that to come. And then contract harmonization. We've got some big customers, and we've got some local customers. And as we've looked through the contracts, quite naturally, there's some differences in how we use those contracts and how we satisfy our customers. So a bit of harmonization would be good. I think that's going to unlock a little bit of value on both sides. Next slide. So what have we been doing? That was all pre-close. We've got people together to review all of this data. But as I mentioned, we've been on the road now for about 2 months since close. We've been around all of the sites in Brazil. We've been around the sites in Uruguay. We've been to Europe, we've been to Mexico, we've been to the U.S. So we think we've touched probably about 1,400 of the 1,800 people, physically seen them, physically presented to them. And that's great to see, and they've been very appreciative of that. And that will accelerate the integration of the teams, which is very important in any integration. And I think what we've seen is 2 things. It feels like we've been together for about 20 years already. A lot of innovation, a lot of discussion, a lot of good collaboration. So I think it's great to see so early in this process. So we're creating this new organization. We've announced the high-level team. We're now moving down into the other levels. We're revamping the innovation organization. We're opening new labs. We've opened new labs in Mumbai recently. We're opening them in Shanghai. We're opening a new center in the Woodlands in Texas. So we're going to have some great innovation capabilities. We now need a great organization to fill those capabilities and one that's truly networked. In terms of the business, comprehensive data pack. As I mentioned, we've done a huge amount of due diligence. We've now released that due diligence back to the people we performed it on. They're using that data to see how they can improve. They can now see our data. So we've got a lot of people in this business now pouring over how can we unlock synergies, how can we improve the business, how can we go to customers in a better meaningful way. A lot of workshops already being presented. Great to see manufacturing together. That's the bulk of our employees is always on our sites, and it's great to see them all working together, and we've had a lot of good interaction in those areas. And then we're discussing now branding. So it's how do you bring 2 separate companies together into a set of brands that really are impactful to the customers. And I think Oxiteno has got some great brands, we've got some great brands. So which brands do we really want to bring, which ones do we really want to bring that's going to be home and personal care brands, which ones are going to be ag brands and which ones are going to be coating and resource brands. And that's where we're going to put our heads around now. So we can go to the market with a real offer now so that customers immediately recognize who they're buying from and what are they buying that's going to really make a difference to their formulations. And then finally, how are we doing all of this? Well, I'm on the road, so it's not me. We've got a good results delivery office. We've got some very talented people and some really good software where we're tracking 1,000 tasks of things we need to do to integrate 2 big businesses together, and that's working very well. And then finally, the cross-functional teams, very, very impressive. They're always impressive when you sell them in the individual companies. When they come together, the amount of ideas that are coming out of these people are incredible. So it's great to see, and I've been so over the moon with the attention to detail, the value of joining a new company, and the value that they saw in Indorama being part of a good chemical company that's growing rapidly. I think Oxiteno really want to be part of this. So it's a great story to see.

Okay. Thanks, D.K. Chris?

Thanks, Alastair. Very exciting. [Foreign Language]. It's fantastic to be here and meet many of you for the first time in person. So thanks for joining us today. Just one slide from me on our Fibers business. But I think it's a slide that can bring to life how we performed in quarter 1. D.K. referenced earlier that we have a resilient and well-diversified portfolio. This is well evidenced in the Fibers quarter 1 results. Fibers achieved 18% growth year-on-year, 4% growth quarter-on-quarter with an EBITDA margin of 8%. And all 3 verticals, Lifestyle, Mobility, Hygiene, have maintained or grown from quarter 4 and all in different ways had to demonstrate that resilience and leverage our diversification. I'll touch on some vertical specifics in a moment, but from a total segment, we were obviously quite impacted by the high energy costs, predominantly in Europe. And our management teams across the verticals took swift action, in many cases leading the market to increase prices, hedge our utilities and limit the exposure of these sudden spikes, and as D.K. said, helped us achieve partial recovery. If you then look at each of the 3 verticals, this resilience was also sort of taking Lifestyle first. Lifestyle had a very consistent quarter 1, and that was in the face of export sales from Asia facing real pressure, particularly from high ocean freight rates. So how did we achieve that solid performance in quarter 1? Well, it was helped by our domestic plays, our domestic markets where our sales yielded better profitability. So it balanced out well. If I take Mobility, everyone in this room would be fully aware of the semiconductor shortage around the world. And there's no doubt that, that impacts light vehicle production and is a challenge for our auto safety business. You're making cars, you're not needing airbags. So how did we achieve the results in Mobility? Well, we've got a balanced portfolio. We have a very robust tire replacement market and that's remained strong, particularly in the U.S. and in Europe. And it has helped offset the impact of the lower new car production. And finally, Hygiene. I think Hygiene, which we all experienced a significant growth during the pandemic, has now hit that new post-pandemic level. In quarter 1, we also saw a partial recovery of the lag impact from our polypropylene prices that we've experienced. So again, a balanced approach to these results. I think my final point on the Fibers business is, as economies continue to open, demand for fibers will remain healthy with domestic demand, and certainly, the continuation of our emerging economies growing. There is no doubt we will continue to rely on that resilience I referred to and the strength of our diverse portfolio as we go forward throughout the year. Thanks for being here again. And D.K., I'll hand over to you to talk about Olympus.

Thank you. Thank you, Alastair and Chris. So you saw Oxiteno integration is on its way. That will be the kicker of the earnings for the second quarter. MTBE is pretty strong. You saw the April margin. MTBE commanding premium over gasoline, the MTBE demand supply being tighter, combined PET, as you know, the season kicks in. So that's the summary of the businesses. . I think we need to track our Olympus, which we committed to you. We continue to have very strong delivery of our Project Olympus cost saving. This cuts across all operational excellence, sales excellence, procurement, and the footprint optimization. As you can see, we exceeded our targets last year, achieving $291 million. And as I just mentioned, that we had a run rate of $440 million. In this year, we are very confident that we'll achieve $500 million. You know, this is a continuous process. So '24, we'll be unlocking about an annualized basis, cumulative $650 million to $690 million per annum. So it is crucial to our success to remain being a manufacturing that in our first quartile position, especially in commodity business, we have to be on the left-hand side of the curve. We have been always doing cost innovation, but Olympus allows us a structured approach, and we are investing in improving our cost structure. So Olympus is right on the track. This is also a very important tool for people development, because as I said, this has percolated down the organization with the transformation of the Transformation Management Office, which we call as TMO. And as you saw, Alastair was mentioning, a lot of work is going on integration and how the value can be unlocked with Oxiteno integration. And that's a substantial value. And that's what we are unlocking. So we are building important project management capabilities in our team and Olympus is on track. Let's go to the next. Financial discipline is very important in the company. And I know that when we did Oxiteno acquisition, there was always a worry, are we going to raise the capital, what we're going to do? As you can see that we could manage from within our internal generation. At the end of 2022, we are expecting debt-to-equity ratio to be 1 only. So we have been able to rapidly expand while keeping our debt-to-equity ratio at healthy and sustainable levels. So even with a large acquisition like Oxiteno, our debt-to-equity ratio is 1.1 and expected to decrease in the following years, as you can see, deleverage very rapidly in spite of large amount of CapEx in recycling and the Project Olympus. Our ability to have a higher debt at 1.1 equity. Well, most of our products are linked to daily necessity. I mean, leverage is always a function of volatility in the earnings. And a large number of PET companies like refineries have a lot of volatility in earning. We feel very comfortable with debt-to-equity of 1:1 as our products serve the necessities. I think very important, on the right hand side, if you see, is the liquidity position. We have $2.5 billion. So we have good war chest. If there is any need of -- crude goes up to $150 or $200 a barrel, we don't care, we have enough liquidity in the system. And in the present inflationary environment, the most important was how you hedge your fixed interest rate, which is very important. As you know, Fed has been very aggressive. They're going to be buying a lot of things. The liquidity is going to get to tighten. This is 62% fixed on gross basis -- gross debt. And if I take by cash net, then it is more than 70% fixed, because working capital and surplus cash which I have. So I have a very low impact on interest rate movement. And as you know, we raised 20% ESG financing and our cost of debt remains 3.3%. So we are well equipped to basically fight the inflation. The result of the business has allowed us to expand the IVL pie. In the past, there has been some game-changing deals. As you know, IOD, we invested heavily; Huntsman, $2.1 billion; now Brazil, $1.3 billion. And we have very successfully consolidated, as Alastair covered. A lot of work is going on in the consolidation. And I myself and Mr. Lohia visited, and I could see the excitement in the eyes of people that they're joining a large organization and what value. And that zeal to unlock the value is there and that's what we are very excited. So we have very favorable tailwinds and sizable capital projects that will start generating the extra earning coming forward. Next slide, please. Well, today's world, IVL is leading the industry's sustainability drive. We are proud that we are the largest recycler in the world. We can sit on the big brand owners, big retailers, sit down with them and talk about the sustainability and lead those drives which we have. We have clear 2030 sustainability goals, including 30% reduction in GHG emissions and 25% consumption of renewable electricity. So when we talk today to some investors, they start with EHS first, what is your sustainability goals, what differentiated products we are going to bring in. I think Chris is working on biodegradable products. So if a differentiated product which we can bring in the marketplace, that's what makes the difference. So our dedicated sustainability function has led out a clear decarbonization pathway centered around strategies that includes phasing out of coal. Well, today coal is so expensive. So even automatically, it is getting phased out in many places. Eco-efficiency projects, renewable energy and utilization of carbon capture and green hydrogen technology. Sustainability is today an integral factor in our decision-making process. Next slide, please. Now we'll go to the next. We are going to go into what is four-year cycle. It has been 12 years since IVL got listed, inception of IVL. And we said, look back what we have done in the last 12 years. You see the growth, a successful integration of many, many companies around the world, whether they were held by private equities, whether they were held by British Petroleum, CEPSA, Huntsman; 2010 to '13, we had 6.7 million tons of capacity, 10.5 million tons, 17.4 million. I always tell it's easy to acquire, but difficult to integrate. But our management team has very well integrated. Today, we have reached the capacity of 17.4 million metric ton. This has allowed us to control the cost and become much more relevant in the industry. We are leading and this company is going to be a $20 billion revenue company. As you saw, $4.4 billion. And after Oxiteno's revenue gets consolidated, I hope we can cross $5 billion revenue next quarter. We also today have a wide geographical reach, which is a very good hedge today in the geopolitical environment. How your bets are hedged in products, in geographies. So with 124 sites today allowing us to reliably serve our global customers. Finally, the absolute growth in book value and return on equity over the cycles. The IVL portfolio has grown and we have been able to retain more value from it, achieving a return on equity of 14% in the last cycle. So this is just taking a stock of last 12 years in four-year cycles. In particular, it's how we look at it. And what is the next 4 years bringing for this company. Next slide. In totality, this has led to less volatility and more resilience. Standing where we are today, we are even more confident of our Capital Markets Day. During the beginning of this year, as you've seen, we have beaten our CMD targets. Today, we have successfully managed many crises, whether it was COVID, Russian-Ukraine conflict. Well, the world is very volatile. We don't know what crisis is coming next. But that's the management's agility, how you handle them. Our portfolio has once again shown the resiliency to the volatility. And we have shown consistent growth, as you can see, the average revenue growth in last 4 years, $11.8 billion, improvement from cycle to cycle, increasing our top line, but also achieving higher absolute EBITDA and margin. As you can see, in the 4-year period, average core EBITDA margin is 12%. And we still have a lot of capital work in progress of $1.9 billion, which will translate into earnings, because they have not come into the operation. We've also grown the bottom line, creating value for shareholders in each cycle, as you can see with the core EPS growth. Our capital work in progress grew in each cycle, which means that we have reinvested in the advance of the next cycle. You will see in next cycle we will reap the benefit of $1.9 billion of capital work in progress. So you may ask me what the -- have $1.9 billion going to translate into the earnings. That's really Corpus Christi. We -- all 3 partners met and then we have decided to bring the projects in line. So that will kick in the earnings. Lake Charles and the other projects which are particularly recycling, which is work in progress. So with each cycle, we have grown the company in size bottom line as well as the quality of the earning to the EBITDA margin growth. So just to give you a feel of how we have been performing in the cycles of 4 years each. This year begins a new cycle for IVL, '22 to '26. The cycle stands to me just as, if not more, rewarding that our previous 3 cycles. Why? Because we have been and continue to make considerable investment in strengthening our platform, people and system. Today, we have invested in capital projects of $1.9 billion and a pipeline of nearly $3 billion in growth projects. IVL is a growth company, and we'll continue to look. Just imagine, Oxiteno plus Huntsman acquisition, which we did, we are the largest surfactant producer in Americas. There's a lot of opportunities for us in polypropylene area where we buy polypropylene, the ethylene carbonate which we can make. So there are a lot of projects which we think about it. So it's a growth company, and we'll unlock those values. We will continue to invest more in the circularity of rPET. rPET is supported by very strong market fundamentals. As you saw the prices, even premium, we enjoy the brand owner support. Strong growth in demand. And we are, today, by far a leader in this space of recycling. So that's pretty much. And we are investing in SAP HANA 4. We continue to strengthen our systems and cost positions. Our investment in SAP, we just rolled out Phase 1. Release 2 is getting rolled out. SAP is a very highly analytical, which will help us to make smart decision-making. And finally, people, people, people. Our business is centered around people in order to ensure the motivation and commitment to our values and to the interest of shareholders, we, as you might have heard in AGM, we launched first time a ESOP program for the top 100 leaders of the firm. So I will -- our growth mindset has been critical, driving success over the last 3 cycles. And we believe that this next cycle of 4 years should be even rewarding and opening many opportunities for IVL. So thank you very much for your patient listening. We will now take your questions. So Vikas, over to you for Q&A.

Thank you, Mr. Agarwal, Alastair and Chris. So we now can take up your questions. [Operator Instructions] So Khun Suwat.

Okay. Really impressive quarter. And let me start with the first question about IOD. From your presentation, how -- could you elaborate more in detail how that you can achieve, let's say, EBITDA growth from IOD? Because, let's say, pro forma-wise, first quarter, IT is close to 200 million, right, 120 million something for existing, plus about 60 something million for the...

Oxiteno, yes.

Oxiteno, correct? So it's about 190 million somewhere. How you exceed that, say, double? Is that possible or more within the next, let's say, 2, 3 years for the quarter? This is for the quarter for the IOD. What strategy you will do? I think it's more like you may enter a new market. You may expand capacity into other markets, something like a Middle East or some other thing. I don't know. That's what I just wonder before I see the IOD now become your second cloud to you. And second quarter -- second question is about Combined PET. Because PET -- Combined PET now is already have, say, $0.5 billion EBITDA quarter lastly. You think that this will have more upside considering that the margin industry is so high? You already achieved such a high market share in each continent, except Asia. And I think that PTT -- PTA and PET is already a mature market. So I just wonder that what upside left for you? And what strategy that you can enhance that Combined PET? And the last one, I'd like to know about the fiber. Because that fiber is still quite relative and packaging is growing, but it seems that you are not focusing on the packaging much probably because you're not -- you don't want to compete with your client? Or do you have any other strategy to grow the packaging and also the fiber? Okay. That would be my question.

The last one, you talked about the fiber packaging.

Growth.

Growth. Packaging growth. Okay. So let me take the Combined PET. I will cover a little bit on IOD. And then I'll tell Alastair to fill in. See, CPET, we have 20% market share in the world. We had 28 million tons globally. We have 5.6 million ton production. We are very well integrated geographically. The PTA margins has been lukewarm because China build a lot of capacity. Outside China, actually, no much additional capacity is coming on. So the biggest kicker was for us will be Corpus Christi. Second will be in India, we are making a plant, converting the plant. We are debottlenecking some capacities. So that will be the growth. On Specialty PET also, there is targeted to be some growth on the PET side. Margins, of course, one of the big play is the freight cost, right. The freight cost disruption. And it doesn't look like that the freights will come so easily down. And the growth has been very good. In United States, last year, the growth was 4.5%. Can you imagine? The developing world, India, the growth is 12% to 13%. The other bigger growth for us will be the recycling. Recycling it has still not contributed significantly to the EBITDA. And as we invest $750 million and as we are in process of strengthening, reconsolidating and scaling up, that EBITDA will kick into it. I don't have any doubt that the CPET virgin will also grow. In Europe, the recycled PET will grow faster. Sustainability commitment is there. So the value will get unlocked into this. IPA, also, we have a leading position in the country. Well, we run into antitrust issues. We can't acquire the plants. But outside, there's always the organic growth possibility. PTA margins, we are not considering that PTA margins, there will be any improvement because China has a lot of hangover. So CPET is -- and we are a net buyer of PTA. Remember, we are not a seller of PTA. Globally, we buy a big quantity of PTA. And so that's CPET. I think we have -- our model of geographical diversification integration regionally, that's a very, very strong model. Packaging, you're right. We don't want to compete with our customers in Europe and United States. But think about Africa, think about Southeast Asia. We have joint venture. I've been with [indiscernible] In Vietnam, this is the first entry we're doing in Vietnam. Vietnam is a large market to grow. If at all, Africa, we are at present only in Ghana and Nigeria. We acquired another company in Nigeria. So packaging will continue to grow, but we will not compete with our customers, like in Europe and United States where we have big presence. So that's on the CPET. IOD, I'll let Alastair also cover. The big kicker for us is the Lake Charles operations, which is get sustainable. Second is Oxiteno's. mentioned to you that Oxiteno is delivering consecutively fourth quarter very good results. They have a leading position in the market in Brazil. A lot of synergy benefits we are talking about. The synergy benefits translates into nearly $100 million. And that is the difference between a private equity, acquiring a business and a strategic buyer acquiring a business. What cross-selling, we have in Europe consolidating, reducing the SG&A. They have a lot of innovation. They are very good in crop solutions. They are very good in coatings. So this cross-selling footprint optimization, all this will unlock a lot of value. Alastair, would you like to add some more flavor to it. And then, Chris, you can take the fiber.

Thanks for the challenge to double the EBITDA in 2 years. We feel accepted. So I think how I would think about this, number one, mindset and behaviors. That's how we're going to really tackle this business. And as D.K. mentioned, very different from a private equity with a growth chemical company, and therefore, we've got a growth mindset. How are we going to get to the next stage of our development? I think I would consider organic and inorganic. Organic, as D.K. mentioned, there's various opportunities for improvement within our own assets, within our own business portfolios to really get to this asset full potential vision that we have, really running assets hard, flat out at the best margins we can get to. I think as we come to Oxiteno, D.K. mentioned the asset full potential program that we've been running across Indorama. IODs had a good performance in that, and we've got a target of about $177 million. We need to copy that program into Oxiteno. That's almost one of the first things we're going to do. We've taken a lot learning in that whole journey that we can help our new colleagues through. So that's one area. The next area is the synergies, and you see them on the screen in front of you. I talked a little bit about them. We see a lot of synergies coming out. D.K. mentioned about $100 million of potential value there if we land all of the being cross-sells, the footprint optimization, vertical integration and the innovation programs coming forward. So we see value there. I think moving beyond that, there's a world out there that needs our products. And we're the biggest now in Americas. We're not the biggest in Asia or in Europe or in China. And it's a $40 billion, $48 billion market, and we're $2 billion of it. So there's a lot to go for. And I think we've got a very, very good backbone model now that we can replicate and replicate to other regions. And it's a question of how do you replicate that? Do you replicate the integrated model, which is possible, capital-intensive? Or do you replicate our specialty model that we're now developing of real bespoke products that are very close to the customers that are bringing pricing stickiness with them. And those are very different types of plants. They're very bespoke, very multipurpose, very tailored to the customer solutions. So that's an interesting conversation that we're having internally now within IOD is to what we should recommend to D.K. and [indiscernible]. And I think the jury is out on that one at the moment. We're pulling together all the data, and we're looking at where we should really push this product. Pharmaceuticals is a great one. Food is a great one alongside the markets I've already mentioned. And then there's other uses of IOD. We're strong in ethylene oxide. As you know, they're strong in propylene oxide, as you know. And there's derivatives of those products that we haven't yet explored. And I think there's real potential there if we move into those potential markets. And then finally, licensing. We do have opportunities around licensing. We have great technology. If we don't want to be in those specific markets, we can license our technology and people really want to buy it. And so there's a lot of revenue generator arms we can create from this. And I think that's the essence of our work over the next few months is to figure out which way to go, maybe all the ways or maybe one bespoke way.

Just a couple of points maybe on the fibers business as well, what gives us confidence to be delivering on our ambitions of doubling EBITDA and getting respectable returns. There's 3 key legs to that strategy. I think one is leveraging our footprint. And we've got some good examples there, which I'll just touch on briefly. Number two is getting best-in-class commercial capabilities into our team. But finally, innovation. And if I just give an example on each of those, manufacturing excellence has been the cornerstone of what fibers have delivered in our FPP delivering the results that D.K. referred to. And we're seeing some really important wins there. You take Longeville, which is our mobility plant in France, historically was that 60%, 70% utilization. That's almost that capacity right now. That wouldn't have happened without going deep and getting the house in order, leveraging our footprint to our customers. We see what we've been able to and how we've been able to manage the, in some cases, volatility and turmoil in the beginning of this year. And it comes back to our commercial practices. I mentioned before, we were leading the market in terms of how we're managing for our customers and with our customers the challenges that they faced. D.K. referenced it. They're not just buying products, they're buying reliability and supply chain, and that's been a cornerstone. But going forward, the growth is really going to be coming in the fibers business in regards to innovation. The macro trends demand it, and it's where our 3 verticals are very well-placed. Mobility with the emergence of the electric vehicle and the innovations we're doing on steel cord replacement is going to be a leading-edge proposition to our Thai manufacturers and fit very much to what our consumers of electric vehicles need, low resistance, noise reduction. The efforts we're putting into recycled PET in our textile business, sitting at the table with our end customers, marrying up their needs that they need to promise their consumers with our capabilities, which we leverage a lot on what the PET business have done in the past. And then finally, in Hygiene, the innovation that we're in imploring and delivering and working with our customers, particularly in the area of sustainability, is critical for the future. Biodegradability is incredibly important going forward for our major customers like Procter & Gamble, Kimberly-Clark. We're at that table, developing our projects together to deliver that to their end consumers. That's what gives us confidence in the outlook for the fibers business.

Thank you. We can take another question. Khun Poom.

I actually have a couple of questions. Should I go one by one?

You can give both the questions, no doubt.

Okay. So like the first one is about the import parity pricing in the West. I'm wondering whether now with the new contract price, it's already above the import pricing parity already because I understand that normally you would sell above import parity, right? So I'm not sure whether now we are already above that. And how sensitive it is to the -- that the freight rate changes? And the second question is more on Europe gas price situation. How much of your hedging exposure is right now like under the -- I understand that you enter more contracts, right? And on top of that, I wonder whether the way you do business in Europe has changed? I mean are you allowed to impose surcharge on energy in more contracts that would help you? Is that the way that the business has been done? And the last one is about China. If the lockdown ends, apart from the MEG, which you think that you will benefit from it, will we see a big jump in export of PET coming out of China because like things are coming back to normal?

Thank you, Khun Poom. Very interesting questions, the questions which we handle on our daily life of running businesses. So import parity in U.S., most of the contracts are logged in not based on import parity, but they were reset based on raw material links. So the margins have an increase. So they're all logged in. They don't change based on import parity. And because, as you remember, we could not reset contract in '21 because in '20 -- they were put in '20. But when we negotiate '22 contracts, those have been all, and that is reflected in the result of the Western world. So those contracts are all set. In Europe, we have a combination, which is set already and some prices which are linked to import parity, but they are not at premium yet. Europe is extremely tight in the market, and the prices are way above import parity. And still in Europe -- and when we come to Asia, Asia is all spot. So Asia doesn't reflect. But when I sell in India, it is again dictated by import parity. So you can say that the Western world, business is more or less frozen for the year, Western earning. So that's how the world business works. When we go -- one big change which is happening in the world today, the people want to have reliable supply. As you know, aluminum is so expensive today. What a beverage company looks at it has to sell their product having the reliable supply, and that is the most important today. We are seeing that trend of regionalization happening, and that is helping. United States imported last year 950,000 tons of resin, 950,000 non-naphtha, non-naphtha means without Mexico and Canada. Europe imported 750,000 tons. So still, they have to import. There's no option. And that's why we being a global player like from Egypt, I can put it on a vessel with a very cheap price, in 3 days, it reaches to Europe from Turkey. So I command in Egypt at much higher prices than Asia. And that's what -- when you see that premium gap -- can you bring that slide on the premium gap? What does the premium reflects when I sell from Egypt, when I sell from Turkey, when I sell from India? India still commands a better premium than Thailand because of freight from India are much lower. So you can see this gap, which is in the first quarter, if you carefully look at the gap, this is the gap which we have with the spot. The light gray is Asian margin, right? And Asia PET margins are also strong because there is overall shortage of the product, and we're enhancing this premium. You can obviously see quarter-by-quarter how this has improved, and this is all because of the reset of the contract. So I hope I answered your first question. Second, on Europe. European gas pricing crisis started from fourth quarter last year, if you remember, the fourth quarter of last year. And then in Ukraine, so Europe, gas price is not having an impact now in second quarter when I compare with first quarter after having a $36 million impact due to that. That is not going to be any more impact as we stand today. Well, the word is very volatile. If you -- Mr. Putin decides to do something differently, then we don't know what will happen. But we are -- second quarter, we are reasonably hedged. We are hedging. Even '23, some systematic hedging we have started for '23 because we don't know this crisis will come to an end or not. So -- and we have been able to -- we have been very proactive in many businesses to put surcharges. Even in the contracts, we have linked that some price content of energy price will be there. So that in fiber side. And in PET, anyway, the margins are already high because of the shortage. So we have been -- management has been very agile to transfer the prices. You didn't ask me, but I will tell you about North America. Because North America gas prices are much higher. And today, our IOD business got a hit of nearly $60 million a year because of the high energy prices. And that reflected partly in this year, but it will reflect second quarter. But we are very confident in second quarter, the MTB margins are very strong. As you can see, MTB, you saw the MTB slide, if you can bring in that what is the April MTB margin over butane. Because as Alastair explained you that $573 per ton for April. And remember, I made 700,000 tons of MTB in the -- so it's a big player. Propylene oxide is a byproduct. MTB has become our main product. So that I think European, I answered yours. China. China, what is happening in China? China is lock out in Shanghai. Hangzhou area is the largest polyster producer. Now all the weaving mills operating rates have come down. Knitting mills the operating rates have come down. So that has resulted into lower demand for PT MEG. So MEG, the tanks are full in China, 1.2 million tons MEG is lying. Now your question was suddenly whether the market will pick up? Yes. Whether it will happen, because pipeline, whenever such situation happens, pipeline shrinks, right? Nobody has material. And then countries open up and then the demand comes up. But we are keeping a very -- second quarter, we don't see that MEG prices should improve than first quarter. It is in the worst phase, as you can see, the MEG margin. If you can go to the MEG slide, MEG integrated margin of naphtha today, I mean vast naphtha-based producer, he wants to cut MEG. If you -- he doesn't want to produce synergy. He says better not to produce. And in Europe, who has high energy cost, they also said we don't want to produce glycol. So actually, we are bringing from Asia and America for European MEG so that we can be competitive. And you can see how -- and this $175, which you're looking at it, the first quarter '22 average, which is the worst margin. Eventually, it will pick up because any commodity cannot run at below variable cost or lower cost. And sometimes, it will come up. But I don't see second quarter. So I hope I answered all 3 of your questions.

PET, like the PET from China, like...

PET from China. So Chinese domestic demand has got impacted because of lockdown, Chinese domestic margin. But we are not exposed much to Chinese domestic market. We are in Guangzhou. So Guangzhou, my plant is operating fully because South China doesn't have any impact. And exports are happening. China exported 400,000 tons of PET, and that is still going on. And -- but as the China comes out from COVID, the domestic demand will take a big jump because pipeline will again get empty. So COVID impact at present is on supply chain from China, what you were -- exports are happening from China. Second is the domestic demand in China. So that is the impact which is happening, and which again benefits from to us is because of the -- we are in the import countries, are opening up Europe, where the demand is increasing. So we can serve from different, different countries. So China, we have to watch how China shapes up. Yes, Khun Komsun.

I got a few questions. First one is you mentioned a lot about MTBE. What did you make in terms of EBITDA in Q1? And what was the historical high when you bought it from Huntsman? I understand that it was during the resign of Huntsman when it made like a very good -- and the margin that we see in April that which is jumps up, is that mainly from the demand pool that push MTBE price at $1,200 a ton and not because of the butane and the raw material price increase? And second one is that you mentioned you have 750,000 MEG and 2 crackers at EBITDA, if you knock off MTBE from 38 million that you made. That was very, very low. You mentioned earlier that they will benefit from the higher oil price. We're now sitting at USD 110 a barrel. Why didn't it happen? Is that because of the Chinese impact that you just mentioned or the fact that by year? And the third one is, will we see a seasonally strong PET spread in second quarter? Or we're not going to see that because of the China is now having -- continue to have a lockdown?

Okay. Can we display how MTBE is made? [ Burban ] that slide. So Khun Komsun, I can't give you the exact numbers, but most of the EBITDA has come from MTBE. MEG is negative, okay? That is the reason. Second, MTBE margins, we buy butane and methanol, okay? And butane, as Alastair was explaining, goes into gasoline blending in the winter season. But in the summer season, it doesn't go on. So butane prices is dictated by arbitrage with Asia and the local demand. So butane didn't go up in that way, okay? This slide tells you that 30.4 million tons of MTBE cost curve, this is made on $65 a barrel. And I told [indiscernible] to make it on $100 a barrel because there's a lot of naphtha-based MTBE, purpose-based MTBE in China where the cost curve is very high, and our cost is lower. So it is dictated by the -- what will be the crude oil price on naphtha base. And in Europe, you see 11% of the MTBE capacity in Europe. So when this MTBE is very expensive to make because of high energy prices, right? It is too expensive today to run the plant at the present energy prices. So you are seeing a demand-supply gap in MTBE, and that's why MTBE is strong. And if you go to the MTBE margin slide -- can you go to the MTBE margin slide, please, how the MTBE margin is split. So you see on the left-hand side of the bar, there's a brand component, correct, the light shaded and before that is the gasoline spread. So the gasoline spread went up. [indiscernible] is crude, yes. And on the top of the dark is, the MTBE premium [indiscernible], which has also gone up, correct? So this strategy a function of FOB United States price, minus butane minus methanol. And since butane is also moving in that direction, and as Alastair was explaining, third quarter last year, it was quite different, right? So the second quarter is all driving season. Third quarter is a driving season. This is a volatile business, but we are seeing positive signs at present, very positive signs. The second question you asked about PET season and spread. Yes, PET summer is the season, up to July, August. We are not seeing any weakening of the spread trade as we speak today. In the United States, Europe, Brazil, anywhere, the spreads are quite strong at present in the second quarter. So it gives us a -- well, what happened Q3, Q4, we don't know. But the Western world, we have already locked in, as we just mentioned. So our vulnerability will be more on the Asia side. The third question you have asked about MEG, right? Now MEG, could you repeat your question Khun Komsun? You wanted to know what MEG is...

I'm just wondering, as you mentioned earlier on, most of the 38 million that you make was from MTBE, then it's nothing from MEG cracker, is that 38 million number, including 2 crackers that...

Yes, yes. It includes the integrated intermediate spreads, so it includes cracker spreads plus MEG spreads. It's negative.

I was just wondering what would drive it back to normalized level now that you are mentioning about the higher oil price? And we're now at like $110 a barrel. We haven't seen impact still accrue to the EBITDA chain of this MET just yet.

Right. So as you can see, this $175 over naphtha base, the world's maximum MEG is made from naphtha base, correct? And that $175 actually, if you take month by month, it was $120 also. So people start cutting the MEG production now, including Saudi Arabia. Saudi Arabia also doesn't see a value into it. U.S., on the right-hand side, you can see this is an integrated cracker spread of MEG over ethane. The right-hand side, 468. So they can still make MEG if you're a integrated cracker producer, but still not a great EBITDA. So that is the way we are able to survive in the MEG. And in the United States, once this left-hand side curve improves, which should be around $300, you will see the improvement in the integrated MEG spreads there. And this is also getting compressed, U.S. integrated spread because of high ethane prices, which are driven by high gas prices. Because gas is a $7 a million BTU. Ethane is about $0.50 gallon or $0.55. So that has also got compressed as you can see further.

For this number 468, normally, cracker cash cost is like $150, $120. MET must be $150. So is that level with some $100 EBITDA?

$150 cash cost, but that's a state of our large cracker. We are -- remember, we have small crackers. That makes a difference. When you says it's $150, and again, depends on the by-product credit. So that is, again, if a large cracker of 1.5 million ton or 750,000 tons of glycol, then they can make small EBITDA.

But you don't have -- because your ethane plan, you don't have a by-product credit, right? You don't get properly or [indiscernible]

Yes, yes.

You only spread-out ethane. So this chart must be implying that directly. So even when 468, is that enough to give you a significant EBITDA uplift? It's got to be what 700, 800?

So this 468 is based U.S. spot price, China spot MEG price. And in United States, the MEG is even cheaper than U.S.A. -- than Asia because of export parity. So in real terms, the realization is lower actually. So this is not the real strength of people. Cheapest MEG is today in America because of export parity. So people can make money, some positive EBITDA if they are a state-of-art plants. But the plants like we have, smaller plants, their cash cost is higher. So that would be the -- Alastair, you want to add something?

I'm trying to understand the nub of the question. Is it, one, are you asking whether we keep running our crackers and will they stay positive COMA? Because the answer is, yes, we're going to keep running our crackers.

I was just curious because looking at the spread in Q1, if it is the U.S. cracker food chain 468. And we are under impression that the U.S. cracker normally, the cash call is, what, USD 120, USD 150. And MEG planned cash cost is another $150. So it will leave you some.

Yes, we have a blended ethylene price that goes into EG. So if you think about what EG ethylene balance, we prioritize downstream first. We keep our downstream plants running full of EO supplied by our own ethylene. The MEG has to buy some ethylene and make some ethylene. So from our EBITDA point of view, you see a blended ethylene price going into EO, which goes into the MEG. So there's a difference between industry margins and IVL margins. So think about it that way. I was at the blended.

And as I mentioned, Khun Komsun, this spread is China spot MEG minus ethane, right? So you don't get U.S.-China spot price in America. You get less freight to China. So that's what makes the difference. So this is even lower than that. But U.S. crackers can still run. Naphtha-based crackers, good class crackers, they're cutting down the production. And the world MEG production is more by naphtha. So it has to change someday because right now, just because of demand is very bad in China, that's what is happening. So there's always a lag between the production cut and the revival of the demand.

Yes. It will normalize at some point. And the important part for this audience is it important to have our own supply of ethylene. And we think it is because the plan for every cracker in the U.S. is to derivatize down. And when they derivatize down, ethylene price goes up and become unaccessible to us. So we've got to protect our own supply. Our brand is very important to us. We have some market exposure, and we think that's good because we can play the market, we can buy, sell, and that's a good decision to be in.

Another important thing that is very helpful for our combined PET businesses. When people have force majeures and all that, having a captive supply of MEG helps us a lot. So this is a whole integration chain. Although we make profitability business by business, but there's a indirect benefit because of upstream integration. But yes, U.S. crackers are in a very -- are landing up into a difficult situation where ethane is moving up, MEG is not doing great, and they have to take a decision. That's why you see the spot ethylene has come down to $0.30 now. Any more questions.

Maybe move to the MTBE slide, I might be able to just add a little bit of color on to D.K.'s answer, give you a guidance.

Can we bring the MTBE slide, please?

Yes. So I think one of the questions was how does this compare against Huntsman days prepurchase. I mean just to take that spread, '17, '18, '19, that was Huntsman years. IVL board spindle top in beginning of '20. You take 700,000 tons, that's your spread, and you take 700,000 tons and you see the spread today. So I won't work the math out for you, but it would give you a guidance to how much better we did in it.

We don't what give the numbers for your own calculation. So Huntsman time, when I was sitting with the seller, he says, "D.K., I sold a business which is doing much better." So this was $358 per ton. Now it's $570. Right now, our business is maximize MTBE. Churn out every kilo of MTBE. That's the guideline.

Thank you. Sermwit, please.

I have 3 questions. So firstly, we have seen tight spreads at 300-plus or 300 levels for quite some time, integrated PET spreads. Could you please tell us if you think these 300 levels are structural? Historically, the average has been 230, 250 or somewhere around there? So that's my first question. Secondly, I want to understand the mechanism of surcharges that you can put on -- because of energy prices in U.S. and Europe. I mean are these ad hoc. Or do you have these in contracts? And what happens if the buyers to reject some of the surcharge increases? And thirdly, just simplistically, can you please give us again a breakdown between contract PET and spot PET that you have Western markets?

Can you bring the spread slide? Yes, thank you very much for your question. You see the PTA spreads are not great. They're $85, $90, and they contribute $85. It's the PET spreads which are holding on. Naturally, it's a factor of demand supply. China unability to exports. You remember China had due China policy, that power policy because they restricted. Now the COVID came in and some of the people even stopped the production. So the availability from China has not been great. Outside China, the demand is pretty strong. So you can see that the spreads are 220 as you said. They have been consistently at 290. Today, we don't see much reason in second quarter, at least, that there should be any change in the spreads. Demand remains pretty strong. But this is all a factor of we don't see any new plants coming outside China. As I said, SASA built in Turkey the last month, which has already been consumed. And so we don't see any outside supply. So China, yes, adding the capacities. China are gradually adding the capacity, but some of the capacities are not running. So we feel comfortable, but it is a subject matter of supply and demand. Mechanism of surcharges. I mean this is a good question. Some of the contracts, we have built in the surcharge. Because some customers, they say that I don't want to give you $100 a ton. So we are -- based on a benchmark price and then you have that. In the United States, in the PTA formula, it is built in that if the oil price goes up -- and that's why in United States, the PTA margins keep going up as the energy goes up. So that's how it's works. Well, whether the people can reject the surcharge, of course, they can reject the surcharges anytime. But the availability of material is an issue. So we have been able to pass through most of the surcharges. And we were very worried when the European prices got hit. And Chris took very active actions and with all the 3 business verticals, particularly fiber side. And we have been able to recover it. On the contract side, the West site, which is majority contracted. That is contracts because today they -- Asia is mostly spot. Asia will just sell. There is an arrangement, but Asia is on a spot basis. And if you remember, we always guided you. We've told you that we are going to reset the contract. First quarter '22, we're in discussion. And that's what the reset contract has translated into the Western market.

[indiscernible]

Yes. West market contributes about 70% EBITDA, but the volume is about -- the total volume is how much percentage?

Yes. So I mean the contract spreads -- sorry, contracted PET as a percentage of Western PET total, is it 100% or 70%, 80%?

It will be up to the extent of 80%, 80% on the West. And 20% is like the informal understanding. That's how it works.

Right. Understand. And can I also ask a couple of more questions?

Sure, sure. Go ahead.

So the other question I wanted to ask was the impact from freight rate. I mean if you see freight rate rising or falling, how much of a lag do you see in the prices that you get on your -- some of your spot shipments in Western markets? Or do you think at least for this year, even if freight fall 50%, you won't see any impact? And I had a second question, but I forgot. I'll come back to it.

This question was regarding the freight, right?

Yes. I mean the impact of freight rate, what is the lag and how long it takes?

So yes, that's a good question. In Brazil, there is a lag of 2 months because Brazilian products goes up to 2 months. And by the time -- so we do minus 2 basis, that lag. And actually, some of the contracts, we have quarterly contract, quarterly freight fixed that this quarter is the fixed. It's calculated based on this price plus freight plus duties and all that is how the income go, import parity. Europe is, again, there's a lag of 1 or 2 months before Europe reacts. But as you know, the present situation of containers is very, very bad. Even if you have shipping capacity available, the problem is the last-mile delivery, driver shortage. When you go to the port, the congestion is so high, then they are not able to berth. And people want to have availability of goods timely. Let me tell you, there's a lot of innovation happening. People start moving by bulks. I myself used 120,000 by bulk to sell PTA. So people innovate that how do you get the cargoes, but then you have to handle the bags, unloading. In United states, if you're taking bags, it's a nightmare. Because nobody can take bags you have to empty it into trucks, and you have taken the bulk silos because people don't have capability to receive it. So this becomes all hurdles. So people see reliable supply in domestic. That is the best thing to happen.

Thank you, Mr. Agarwal. So we have more questions online. So Mayank, thank you for patience. So can you ask your question now?

Mayank is online. Okay.

Mayank, can you hear us?

Yes, Vikash. Can you hear me?

Yes, please go ahead.

Yes. So a couple of questions from my end. One is basically a bit of a question for Alastair. In terms of the cracker now, when do you think you can make it run profitably or at a utilization rate which is reasonably positive? And in terms of -- obviously, the margins versus ethane are not great right now. But how are you kind of thinking about managing the portfolio from ethylene perspective because you talked about MTB maximization. But is there anything else that you guys are doing to kind of think about improving the utilization rate for the cracker and the margins? And the second question, D.K. sir for you would be more in terms of CapEx and debt. How are you kind of thinking about your net debt profile post Oxiteno? And how much do you think about in terms of -- your numbers were pretty strong for the first quarter. So how are you thinking about the deleveraging from that perspective?

Alastair, you want to take the first question?

Yes. So we run -- we run our Port Neches crack at about 93% OEE. So that's a pretty good target to go for. We've got a lot of operational experience with that cracker. And that's where we're heading with Lake Charles. I think the -- we started up in very late October really in November. So we've had a few months under our belt. We've taken a few pit stops to correct and adjust as well we should. We'll take a few pit stops in the coming months. That's the plan we've got to steadily improve, test, improve, test, improve. That's the way we're going. So we've got a target about 75% for the year. Next year, it'll be higher than that. And the year after that, it'll be higher than that. But think about the ultimate target being 93%. And we're pretty confident we're going to get that. We've got a very, very good team. We're building a very good, I guess, process safety system around it, around the people, around the systems, around the maintenance systems, et cetera, which are all running a plant. You've got to have run time in order to get the full value. And we've got a team that's really dedicated to driving forward. That's a real operational team. So I think you'll see some good coming out of the cracker. I don't want to give you a month-by-month, blow-by-blow account, but we've got the right projects and the right process as an event to take it forward. And we've had some pretty good run times over the last 6 months. We've had some good OEE in April, and we're pretty pleased with how the plants performed. So that's the story on the cracker. In terms of margins, look, we've seen high. We've seen margins low. We've seen margins in the middle. That's going to be the story, I think. I feel ethane is going to eventually loosen up. We're heading into a turnaround season. We should see some improvements continuing. Gas rigs are coming online all the time. And if you track them monthly, you see every month they've gone up further. So NGLs will become looser. We've got capacity that's come online recently that cause the spikes when you start something up. And the supply chain, the isomerization units have always got to catch up. We saw that in 2018. We saw it in '20. The supply chain just corrects itself and gas starts flowing more evenly. So ethane think with gas pricing start to normalize at some point in the future, you should see ethane start to stabilize a bit better. Ethylene is going to go up. I mean that's the reality because it's a good place versus the Middle -- versus Asia to make cracked downstream derivatives. And they're going to continue flow. And I think the -- all the crackers are coming online. Nobody's building a cracker for ethylene. They're all building crackers for downstream derivatives, either for internal markets or export markets. And those are going to flow. And when they flow, unless ethylene is available, so the ethylene -- the price goes up, so the margin goes up. I mean that's the way the world is going to operate. So you'll see a return to more the normalize margin that we would see rather than these peaks and troughs. I think other ways we're going to improve, as D.K. said if you get asset full potential going, you get the right money and you get the right variable cost from the plants and you run them full. That's always the way you're going to make money out large upstream equipment. But we've got other ideas like we push RGP through plants, and we upgraded to PGP. That's quite profitable. And we do that with Port Neches. We will plan to be doing it at Lake Charles. So think about those sort of areas. We've got some good assets. So it's a question of get it stable, get the run time under our belt. The margins will look after themselves. But then what else can we do in the plants to bring more raw materials in and upgrade them. And I think that will be our key to success for Lake Charles and Port Neches for that matter. So we're committed to these crackers. We'll get them running up and like we've got with Port Neches like Lake Charles, you'll see this thing.

So say for Lake Charles, what would be your EBITDA drag for this quarter? And are you expecting that to have any positive EBITDA this year at 75% utilization rate?

Yes. We're expecting positive EBITDA this year from Lake Charles. And I think in quarter 1, we saw positive margins. We're not really separating them by individual unit like that because we present integrated margins. But I think if you see the crack spread and the volume that we ran, we ran a positive EBITDA on the Lake Charles cracker.

Mayank, coming to your question on net debt to equity, I think if we can go to the slide, even at the peak, after Oxiteno acquisition, we'll be at 1.3. We are going to deleverage. You can see in the -- here, there's a lot of assets which are not churning money out at $1.9 billion, which includes basically Corpus Christi project. You can see here Corpus Christi is getting activated as one the most cost-efficient plant, which will start having earning going forward once it starts the plant. The recycling, I mentioned to you, and that's the CapEx which you see in front of you, $2 billion roughly. And Oxiteno, which will churn out $215 million. In addition, we'll have the synergy benefits coming in. And then the Oxiteno acquisition of $150 million, deferred payment is in 2024. As you know, we had deferred this payment. So we are very confident of deleveraging. If you can go to the leverage slide. Can you go to the leverage side? Yes. So I hope it answers you. We talked about 0.79 element. I mean strongly, it will deleverage with the cash flows. Please don't forget that we are -- we have put in a lot of money in the working capital in '21 and '22 because of increase in the prices. So that has also impacted. So it will get deleveraged.

So D.K., just one follow up on this. For the second half of this year, how much are you thinking about in terms of repayments from absolute gross debt perspective?

We have repayments. Yes, so Mayank, in Q1, we have repaid $300 million -- over $300 million debt. And you can see that this year, we have $2 billion of CapEx, including Oxiteno. So debt levels would be quite similar. But net debt to equity will come down because the equity base will go up.

How much is the repayment second half?

I can give you off-line if you want.

Yes, we can give you the offline numbers, but there would be a repayment and then there'll be some debt due to Oxiteno acquisition.

Yes. You know that we recently raised Thai baht debentures also. So we have a lot of liquidity in the system. The second half will tell you what is the repayment coming in, yes? Remember, debt equity also is a factor of translation gain losses. I don't know whether you people notice because we have invested in euro and U.S. dollar. As Thai baht weakens, our value of investment in translation terms goes up, which goes -- it not come through the P&L, but it goes straight balance sheet, which improves equity. So you will see that also coming up in the second quarter because Thai baht is weaken.

Thank you. Any more questions? Yes. Sermwit.

You remembered your second question. Good.

So my question was around the PET earnings in first quarter. And I just wanted to confirm my logic, if it's correct. So as I understand investment markets, you have contract spreads and feedstock cost pass-through, which means if the MEG prices are coming down, that is not driving your PET margins higher. It is keeping it flat. Am I getting it straight? And if the MEG prices are dropping, that means you are losing margins on MEG. It's not getting offset in PET. Is that logic, correct?

So if the energy prices goes up, right?

MEG prices.

MEG prices. So MEG prices goes up, it's pass-through. It's basically a pass-through mechanism because it does get reflected in the cost and then you pass on. MEG actually in Europe today is Asia plus $200 because nobody wants to produce MEG in Europe because of the high. So we bring MEG from Europe and United States there. And we're also getting the arbitrage advantage of the efficiency. You see it's all management ability. When you say that Europe MEG is expensive, how do you bring MEG cheaper from other points and even improve on the margin. But short answer to your question is, if MEG goes up, it gets passed on. And similarly, in U.S.

Right. So my question is reverse basically if MEG is coming down, that doesn't mean your PET margins are increasing in Western markets?

Most of the contracts, which are linked, that won't go up. But in spot, there can be a lag by the time MEG, so there can be a lag of black gain loss, timing gain. And if you know, for me, if MEG goes up, I'm very happy because my IOD starts making much more money. So the portfolio, where you have the buckets, I always wish MEG goes up because you have such a huge MEG capacity.

That is my wish because...

Any more questions?

No, there are no more questions online, and there are no more questions here.

So we really appreciate and thank you very much for your physical presence. I know it is -- in spite of COVID, you have made it, and wish you a very happy week and the evening. Thank you very much.

Thank you.

Thank you.