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

A very good afternoon, everyone. Welcome you all to IVL's Second Quarter Results Meeting 2022. I'm Vikash Jalan, Vice President of Investor Relations and Strategic Planning. Joining me today, Mr. D.K. Agarwal, our CEO and CFO; Mr. Sanjay Ahuja, Executive President for CPET segment; and Mr. Chris Kenneally, Executive President for Fiber segment. A quick disclaimer that this meeting is being recorded, and a replay of this session will be available on our website after the event. We have made a few assumptions and estimates and future industry trends and business, which are based on our analysis and available information at this point in time. With that, let me now invite Mr. Agarwal first to take us through the prepared presentation.

Very good afternoon. Welcome to this second quarter results. If we can move to the next slide. IVL has posted a very strong second quarter results achieving a record core EBITDA up by 17% quarter-on-quarter and production volume up 1% quarter-on-quarter. Our total sales revenue in quarter 2 has increased by 11% quarter-on-quarter on a same-store basis with the CPET portfolio an increase of 13% quarter-on-quarter. As you know, this quarter, we incorporated 2 new businesses into the portfolio very successfully, Oxiteno and Vietnam Packaging being an additional 12% in revenue growth. This result shows IVL's differentiated model and well-positioned portfolio has resulted in a platform that cannot be imitated. IVL has market leadership in each of our key business areas in industries that are organically growing at approximately 3% to 4% per annum, and that's why you see these results. Again, 75% of IVL's portfolio, so consumer-linked daily necessities that have proven minimum interruption due to GDP fluctuation. Underlying demand for the majority of IVL's portfolio has remained rock solid, and second quarter results have been driven by improved margin, more than compensating for the increased energy and utility costs in Europe and the United States. I know you are worried about that, and these are after that additional cost. Supply chain disruption, of course, has been a major theme for the past 24 months, and IVL has been a beneficiary. As a domestic producer in the Western markets, the heightened freight rates and longer lead times for imported goods have allowed IVL to reprice our domestic sales at attractive margins. Looking to the shipping industry for guidance, a major shipping company has increased its 2022 earnings forecast due to continuation of the current market situation. They expect a gradual normalization from quarter 2 -- quarter 4 '22, but freights will remain significantly higher versus pre-pandemic level, as you can see, because of the increased cost. Providing integrated operation, geographical diversity and shorter supply chain, IVL has demonstrated itself to be a reliable supplier to customers, and we believe that industry will fundamentally shift towards higher appreciation for domestic supply chains. I mean when we talk to the customers, they want all domestic supply. The second quarter saw Brent crude oil levels rise to a peak of $114 per barrel and the corresponding significant arbitrage between Western and Asian octane prices resulting in an inflated raw material cost. We are pleased with our management to ability to successfully navigate these cost increases along with the rising energy prices, demonstrating our market leadership and the reliability of supply we bring to our customers. Management believes Brent crude oil, of course, will begin to normalize going forward and have thus taken the necessary prudent action to reduce operating rates in order to minimize the inventory losses. The normalization of octane cost arbitrage over the next coming months will bring down feedstock inflation in the Western markets. We saw very high prices of octane in June and in the mixed xylene. IVL has always placed utmost focus on maintaining operational excellence, notably on cost management. The Project Olympus, as you are aware, has allowed a structured and disciplined approach to continuous cost and commercial innovation that is crucial for our business in order to remain in the first quartile position. The last 12 months has seen an unparalleled increase in energy cost with further increase anticipated in the next 6 months before the situation gradually normalizes. Project Olympus, along with our agility in managing cost increases has allowed the company to not only absorb these levels but improve on our overall performance. So this results of second quarter are the testimony of the portfolio which we have. Let's move to the next slide. This slide shows you the key cranes, the 4 key trends that are impacting IVL's performance that I mentioned earlier. During quarter 2, we saw robust demand fueled by post-pandemic opening of economies. You see the economic activity index. We expect reopening of China to bring considerable demand growth and counter some of the contraction happening elsewhere. Actually, we are sitting on a very tight inventory. And with China opening up, it can be even become tighter. Brent crude oil, another factor, which drives our performance as it supports our North American MTBE and MEG business as well as giving the PET business support import parity advantage in the Western market was $1.13 per barrel higher versus the last quarter. We expect crude oil prices to begin to normalize, but remain elevated over the next coming months. You might have noticed OPEC's recent decision to increase production by 100,000 barrels per day last week, highlighting that several limited availability of excess capacity necessitates utilizing it with great cushion in response to severe supply disruption. So far, we have seen limited impact on crude oil prices, suggesting that the market does not expect any market additional supply. And geopolitical plays a very important role. The third element is the freight rates, which is another factor giving us advantage being a local supplier in our key markets. We are seeing some normalization from quarter 4, but there should be some offset from the strong integrated PET spreads. You will see that July integrated PET spreads and August are higher than second quarter and a strengthening dollar, which helps our conversion cost. We'll remember that our spreads globally are in U.S. dollar terms while conversion costs are in local currency. So a stronger dollar against euro against many currencies helps us in those geographies. So these 4 themes remain rock solid for us going forward also. Let's move to the next slide. Now let's go into the second quarter business and financial results. Next, please. This gives you second quarter results. IVL has posted a very strong second quarter results, achieving a record core EBITDA of $758 million, 17% up quarter-on-quarter and sales volume up by 4% quarter-on-quarter. Our revenue in quarter 2 has increased to $5.5 billion. So this is a company which is in excess of $20 million annualized by approximately 11% quarter-on-quarter same-store basis with the CPET portfolio seeing an increase of 13% quarter-on-quarter. And as I mentioned, this quarter, we consolidated 2 new businesses into the portfolio of Oxiteno and Vietnam Packaging. Record revenue of $5.451 billion, an increase of 23% quarter-on-quarter, 53% year-on-year. And as I mentioned, our company today is over $20 billion annual revenue company, which puts us in a very high ranking among other global chemical companies. It is important to understand the reported EBITDA. Reported EBITDA is $1 billion in excess, a growth of 29% quarter-on-quarter and 83% year-on-year. Record core EBITDA of $758 million, a growth of 17% and year-on-year growth of 59%. The core EBITDA margin is at 14% and core ROCE struggling 20.2%. We have been putting a lot of focus on the working capital. You can see the operating cash flow of $900 million, which is a cash conversion of 120% of core EBITDA and how it has been achieved, reducing the 2 days in the new working capital cycle. All this translated into a reported net profit of THB 20.3 billion, a quarter-on-quarter growth of 44% and year-on-year growth of 143%. Reported EPS for this quarter is THB 3.58, LTM basis is THB 8.11 and core EPS of 2.32. LTM is 6.14. And as I mentioned, Oxiteno and Vietnam were the 2 major acquisitions. All of you are worried about energy spend. Total energy spend this quarter increased by $27 million quarter-on-quarter and $155 million year-on-year but was offset by enhanced margin. We'll explain you that in the bridge as we will show you. Let's move to the next slide. So let's look at the stock of first half, what did we do in first half. Revenue of $9.9 billion, increase of 4% year-on-year, reported EBITDA nearly $1.8 billion, a growth of 74%, core EBITDA of $1.4 billion, a year-on-year growth of 67%. Core ROCE of 89 -- 19.8% in first half shows our strength in the business and our ability to navigate through this macro geopolitical volatilities. And operating cash flow, as I mentioned, has been very strong $1.449 million, more than 100% cash conversion of core EBITDA, deleveraging the company. Reported EBITDA -- reported net profit for first half is THB 34.3 billion, a year-on-year growth of 139%, and reported EPS of THB 6.05 and core EPS of 4.17, which is a significant increase over last year. Total energy spend. Now this is an interesting number. First half increased by $303 million year-on-year but was offset by enhanced margins. So you can imagine that, in the first half, we spent on energy and we spend on that, we reported these results, which is across in United States, Europe, high coal prices, et cetera. Let's move to the next slide. Now let's look at the volume. Overall sales volumes were slightly higher than last quarter, as you can see, higher volumes came from Oxiteno and Vietnam acquisition. However, we lost 100,000 volume in combined PET because there was an FM for acetic acid and hydrogen suppliers in Americas and planned PTA maintenance turnaround, lost about 40,000 tons. In IOD, we had 2 ethylene oxide units turnaround, which was a planned turnaround, led to a volume loss of 60,000 -- and it impacted our downstream business also 50,000 in MEG and 10,000 tons is downstream because you didn't have enough ethylene oxide. All the supply disruption and planned maintenance are now normalized. Fiber, of course, Lifestyle fiber demand were under pressure from China lockdown. You will see that the fiber did not perform as expected. What do we see in the outlook? We see upside in volumes in second half '22 with normalization of lost volumes in first half '22 and a very strong demand, which will provide us a growth of around 5% in second half '22 versus first half '22. Looking at immediately next quarter, we see a growth of around 4%, which comes in all 3 segments. Our global and well-diversified portfolio provides us as a natural hedge against inflation or recession, which are due to our product application, majority and daily necessities. And I will show you one slide how our major customers like Coke, Pepsi has shown fantastic results, which shows the resiliency of this necessity. Let's move to the next slide. Now let's look at the IVL's core EBITDA was $758 million, has grown 59% year-on-year, 17% quarter-on-quarter. If you look at by segment, CPET was pretty flat, where higher margins were negated by lower volumes, as I mentioned, due to planned maintenance and FM by acetic acids and hydrogen suppliers in Americas. Higher margins, of course, due to reset of contracts in the West and demand growth. And as I speak, for '23, we have already signed up 33% of the contracts in United States and Mexico at better than or nearly close to 22 margin. I will talk about this later. IOD segment improved with Oxiteno to face headwinds with very weak cracker and MEG spreads. I think IOD segment had suffered a very strong headwind of crack margin and MEG spreads and also due to volume loss from 2 EO units, which were maintenance and IVOX in Port Neches, but got the support of MTBE's strong margin. Fiber weakened with China lockdown. We still had a lag loss from higher polypropylene prices and poor mobility fibers demand because of the semiconductor shortage. Total lag loss for this quarter was $11 million compared to last quarter. So you can imagine that, that impacted. As I mentioned, high energy cost of $27 million quarter-on-quarter and $155 million year-on-year. So what do we see looking aside? Looking ahead, we see upside from higher volumes in second half '22, which could be in the range of around 5% over first half. We see some upside coming from very weak cracker and MEG spread as they are clearly very below the reinvestment level margin. I mean, cracker margins in the second quarter was $0.03 per pound, which is below variable cost. We also expect upside from higher demand in fiber as China economy opens up and upside from the synergies of Oxiteno. I think we haven't unlocked the synergy, yes. On the contrary, we will see softness in MTBE as the octane value declines, and we will discuss more details under each segment. One of the very important yardstick here, you can see that core EBITDA per ton moved to $198 per ton versus first quarter $171 and $132 per ton in second quarter '21, which shows you the strength of the business. Next slide, please. Now we have to also see regionally how the regional looks like. As you can see, Americas is the star with $451 million versus $330 million. So Western market continues to show very strong earnings in spite of high energy costs. We have demonstrated this continuously for 3 quarters to you that high energy cost is passed through directly or indirectly through margins. Americas naturally had the benefit of Oxiteno. Oxiteno contributed about $85 million in this quarter. The rest came from the other businesses. We see softness in Asia due to lifestyle fibers, as you can see in the fibers. So that is the result in Asia. Looking ahead, we see Western market continue to benefit from reset of PET/PTA contracts. We'll talk about PTA contract. PTA contracts are actually in the U.S. linked to energy and PPI and they have significantly improved and which will continue in '23. So higher energy cost continues in second half '22 but mostly recovered from enhanced margin. Asia upside from improvement in Lifestyle fiber as economies open up. So we see some upside, but at the same time, MTBE will be weaker in the second -- in third quarter. Let's go to the next slide. This bridge is very important, which shows you quarter 1 from $650 million to $758 million. What exactly happened during -- we'll compare core to core. Of course, we saw a $252 million of inventory gain. Oxiteno and Vietnam as you can see, as a separate line item, is $88 million contributed and $85 million, I said Oxiteno. Margin improvement is seen across the portfolio mainly driven by reset of Western PTA, PET contracts, strong MTBE and integrated downstream margins, particularly in the surfactants negating the weaker cracker and MEG. So we had a headwind on the cracker and MEG spreads but strong in the other areas. Lower volumes, as you can see, $26 million loss due to plant maintenance in IOD, those 2 EO units and CPET segment because of FM. Variable cost in this quarter was $27 million energy impact. So most of that is recovered -- more than that is recovered in the margin. And fixed cost is higher with inflation partly negated by efficiency gain in Project Olympus. So this gives you the bridge of quarter-to-quarter. Let's look at year-on-year. Next slide. So what has happened from second quarter '21 to second quarter '22. We made $477 million, $758 million. Of course, again, Oxiteno and Vietnam contributed $88 million and margin improvement of $337 million mainly driven by Western PTA, PET contracts, strong MTBE and downstream spreads but negating weak cracker and MEG spreads. So there is MEG and cracker. And just to give you an implication of cracker, cracker did not contribute anything in this quarter. And if in a normal case, it would have contributed at least $45 million to $50 million on a quarter. So these sort of tailwinds and headwinds. Lower volumes, as you can see, $15 million loss due to plant maintenance in IOD and CPET segment, as we talked about the FM; and variable cost of $155 million. You can see here, $173 million total. Energy is $155 million. $18 million is others was fully recovered by margin. And fixed cost, yes, inflation there but negated by efficiency gain in Olympus projects, which has nearly contributed $63 million. So this gives you a bridge on quarter-to-quarter. Let's move to the next slide. Let's now go to the business segment wise. CPET continues to deliver a very strong performance, achieving a core EBITDA of $431 million, a growth of 35% year-on-year and a slight decrease, 1% decrease. As I mentioned, volume improved with a high demand, supply constant and low inventory environment, though got offset with volume loss due to planned maintenance of PTA in Thailand. At PTA site and FM by suppliers for acetic acid. So we lost some volumes, which is now normalized. Integrated PTA Asia margins have normalized since fourth quarter '21 but remains at a high level as compared to historical average due to market tightness and higher operating costs. The successful reset of PTA/PET contracts completed at the end of '21 has favored our Western businesses and will continue to benefit. Rising energy prices have been mitigated by hedging efficiency and passing on the prices. PX business actually suffered in second quarter because the octane value, the mixed xylene prices went up skyrocketing due to high gasoline blend value, especially in June. Packaging performance increase with the Vietnam Packaging, and Specialty Chemicals, especially PIA, got a hit because of, again, high mixed xylene prices, which are now getting normal. So we had a -- IPA did not perform better because of the high feedstock prices. Looking ahead, integrated PET Asia spreads continue to be strong. In July '22, as I mentioned, it is in excess of 300. As I speak in August, that is also higher than 300. Why? Because there's a low pipeline inventory. China is sitting on 6 days inventory and robust demand. Upside from volumes in second half '22 and upside from high octane values of PX and PIA spreads which are improving as the octane value in the United States has collapsed. And we will see that PX settlement will be much lower in August. Let's move to the next slide. This is an important slide, which gives you a historical PET spread. The blue line shows you what is the industry spread, which also shows you that it is pretty stable. And we are getting the premium. And why do we get the premium? We have recently seen an upward trend in the market in July. You can see that arrow going up because in July spreads are up. As shown in the graph here, Asia spreads has been trending upwards due to very tight inventory and strong demand globally. Actually, Chinese are offering today material only for October. Structurally, market in Europe are much more consolidated. You can see the top 2 players in Americas control 80%, top 5 players in Europe control 70%, so great consolidated market, allows us to command a sizable premium in the market. IVL has demonstrated itself to be a reliable supplier to the customers during this supply chain disruption period. And we believe that industry will fundamentally shift towards higher appreciation for domestic supply chain. And you can see the gap of the premium enhancing. And these are all the factors, including the PTA, which I said to you, in the U.S. is linked to the formula price. Being a commodity product, PET will see some volatility driven by market disruption but through the cycle continues to deliver healthy earnings. And that's why we are different than other petchem companies. Due to its affordability, sustainability and favorable properties, vis-a-vis other packaging material, PET demand continues to consistently grow globally, and that is our key driving force. In addition to PET's healthy organic growth, the CPET segment has been enhanced through the downstream recycling and packaging verticals. And that is the result of the fantastic earning in CPET business. Let's move to the next slide. This is an important slide to show you the world PET trade flows. And you can see that in North America, the imports increased to 1.17. South and Central America is a 1 million ton and even Europe has 1.4. What does it show and how the demand was met, was met by China because there was no material available rest of the world, and that's why Chinese as sitting 6 days inventory. And you saw the 3.8 million tons got exported from China. This shows the growth of the business. So you know the very major decision was taken by us. We had given a pause to the Corpus Christi earlier. But as we looked at the post-pandemic demand growth and the deficit in North America, 1.2 million is nearly 30% of the demand of the Americas, North America, along with our other partners, announced the construction of the integrated PTA/PET plant in Corpus Christi will resume this August. You might have seen news article about the contractor. Corpus Christi Polymer is expected to begin operation in early '25 and ensure cost competitive production to support the growth of IVL's global PET operation to the next decade. As you know, we have already spent $450 million, and that is sitting on our table on our balance sheet. The total cost will be $700 million to $725 million, so I have to spend only $275 million. The decision to resume construction comes with continuous robust demand for packaging, bolstered by continued improvement in recycling infrastructure and the need for shorter supply chain. And as you see, the global trade flow explains that the deficit market will continue to grow. And only China, there is not much capacity getting built. And in America, there is no capacity built. So there is a need for a state-of-art world-scale integrated production site, such as Corpus Christi to cater to the growing demand in this region. So this is a state-of-art very cost-competitive plant, very closely located with the paraxylene and MEG reserve. Let's go to the next slide. Now let's go to the IOD. So IOD achieved a core EBITDA of $259 million versus $126 million, a growth of 106% and 162% year-on-year. Now integrated intermediates business, which is basically MTBE, MEG and the portion of the crack margin achieved $109 million in core EBITDA, up from $38 million. Of course, this was primarily driven by strong margin MTBE due to high gasoline prices and lower costs driven by decreasing butane prices and additional income from selling technology license for MTBE. That's $9 million happening in our other income. However, this got negated by a very low integrated MEG spread, which has been under pressure because of zero COVID policy and lockdown dampened China. As you know, the majority of the goes into polyester, and volume loss from planned turnaround of 2 EO units in IVOX at Port Neches in Americas, which is regularized now. The star is downstream. You can see integrated downstream. The addition of Oxiteno into our portfolio has brought an upliftment of $85 million into the integrated downstream portfolio driven by robust end market demand. With this strong demand, Oxiteno has actually demonstrated its ability to successfully navigate inflated raw material costs. In the European raw material cost went up to nearly EUR 15.80. So they could pass on everything. With integration successfully underway, we are confident that we'll deliver 30 million in synergies by 2023 and 100 million by 2025. So Oxiteno has been a great acquisition. However, excluding Oxiteno, you can see that integrated downstream was impacted in North America because of the crack margins. The crack margins, ethylene crack margins dropped $570 per ton to $360 per ton due to the -- and also due to the turnaround of the 2 EO units, restricting supplies of ethylene oxide to downstream. And although we try to mitigate that by bringing ethylene oxide from Clear Lake. The downstream demand in the home personal care and ag chemical market remains strong, resulting in strong margins for surfactants and [ LV ], while housing and construction markets have seen some softness. Activity did pick up on drilling with rig counts up in North America, supported the oil and gas market for surfactant. So looking ahead, we see an upside in this business from Oxiteno from very weak cracker and MEG margin. However, MTBE margins will get normalized at historical or better than historical levels. So this is -- I mean, the IOD business has really strongly performed. Let's go to the next slide. This is an important slide, which we have shown you earlier. There are 2 ends of spectrum for the surfactant industry. On the one hand, which is the left-hand side, there are integrated high-volume players such as Shell and Sasol. When we first acquired Huntsman, they were also one of the large-scale integrated platform place. At the other end of the spectrum, if you see the right-hand side, there are players who are highly specialty players who have limited integration but are highly specialized with a strong innovation and they naturally their profitability percentage is quite high. You can see COMA is about 25% to 45% because they spend good money on strong innovation and high R&D. So like Croda falls into this. With this Oxiteno acquisition, we have moved right hand side which, of course, made us the largest player in Americas and enhancing proximity to attractive end application is higher and more stable margin. Proximity to end market is linked with higher contribution margin, and you saw the results of Oxiteno, but we also spend on R&D. So what we have done here is that we have developed a hybrid model between integration and a specialty model to capture the best of 2 worlds. Our intermediate business provides scale from stream integration into ethylene and EO to support the highly profitable downstream verticals. So you have benefit of integration, and you have downstream also. This result is a combined IOD portfolio with an elevated sustainable quality of earnings. And the Oxiteno, as you saw the results, with new products in the pipeline, will continue to move further to the right with sustainable solution while maintaining our integration. So this is -- gives you an idea where IOD has headed after acquisition of Oxiteno. Let's move to the next slide. I think we want to explain you a little bit what is the surfactant. IOD is a leader in the production of surfactant and specialty chemicals offering comprehensive product property portfolio for a variety of applications. And these are 2 examples here, personal care and crop solution. On the personal care side, our surfactants are ingredients, that are again used in the formulation of daily necessity like liquid soap, shampoos and bath foam, which you use daily. They promote mildness and prevent irritation. Conditioners are also made with our surfactants. It makes hair stronger, reduces the split ends and protects hair from future damage. Our surfactants comprise the key 30% of the content of a typical bottle of product with the remaining content we got. So what importance it pays in home and personal care. So a dedicated expert team across regions, innovation platforms and international quality standard we develop ever more sustainable agriculture solution. So crop solution, where Oxiteno is very strong, is specialized in the development of additives that maximize the performance of active ingredients in the field while crop enhancement solutions contribute to increasing crop yield by enhancing new trend for better plant developments. I mean, you need better properties in the crop solution so that your yield improves. In addition to these, our surfactant also go for oil and gas drilling, coatings, architectural paint and industrial coatings. So you can see how we have now built a system that is capable of supplying a very wide range of solutions in the market and gives a strong growth opportunities for this business. Go to the next slide, please. Again, the slide gives an overview of current IOD downstream business. It's a significant business today, a $3 billion business. More than 20% of the IVL EBITDA in a highly specialized business with over 2,000 products in its portfolio supported by 18 industrial units to cater to both volume and specialty business, 11 R&D centers. The IOD segment profile has enhanced by more dominant and stable integrated downstream, which you saw the vertical that 66% of IOD COMA is contributed by that, which is further strengthened by improved product mix into high value-added products for Oxiteno, reducing the impact of more volatile. You saw that intermediates are more volatile. This is a very strong earning resilient business. As you can see, IVL is an industry consolidator. We have done this in PET, consolidating many PET businesses. We see an opportunity here to expand this business in a similar way to both geographical expansion and product mix expansions. I think the beauty of this is that you have common customers and then you can use the solutions in different parts of the world. So there are a lot of growth opportunities into this business. Let's move to the next slide. This shows you quarterly earnings of Oxiteno. You can see we have plotted you third quarter, fourth quarter, first quarter, second quarter. The addition of Oxiteno brought $85 million in this quarter. Now what is the magic thing which is happening? Of course, the Pasadena, there's a plant next door located to Clear Lake. We have continuously improved with better asset utilization, product mix, lower feedstock prices and fixed cost optimization. And still we have not unlocked the synergy of supplying our own EO because we have contracts with third supplier, which will get rolled off by the end of the year, and that's what you saw the synergy benefits coming quickly in '23 and then moving to $100 million. Stronger-than-expected organic growth in Brazilian market, as COVID pandemic boosted surfactant sale in home personal care and agriculture market. And very important is the good performance from new product development. We call it NPD, and new sales development means you -- basically, you do a value pricing across the region and efficiency improvements coming from the digital technology in the plant and internal processes, which is very strong in Oxiteno. As I always say, we learn from every acquisition. With this, a stronger performance, bolstered by their unique formulation and customer intimacy, Oxiteno has demonstrated its ability on pass on very high ethylene cost increases. And this inclusion of Oxiteno has brought high value-added downstream surfactant products and also very differentiated bio-based products. We have -- bio ethylene is available, and we are very excited with this acquisition. -- management is very confident of delivering $30 million synergy by '23 and in excess of $100 million by 2025. Next slide, please. Now let's talk a little bit about MTBE. The bright spot, as you can see, this graph is -- has been MTBE, currently at historical high margins due to strong gasoline demand and octane value as well as lower U.S. butane and methanol prices. You see from the chart on the left-hand side that we had a sequential improvement in the gasoline. So you see the dark blue. That's the premium of MTBE over gasoline. Although the gasoline has dropped in July, you can see that the premium remains. And we had -- this premium of MTBE remains strong. We expect MTBE spreads to normalize but not to go over the next month to remain robust during this tight oil market environment. You can see in July, it has gone to 780. As you speak in August, it is pretty close to that level. I just want to mention, though, that there is volatile market, as you might have seen, is recession-driven softness, there is some demand impact of propylene oxide. So we are optimizing the MTBE. But as I speak yesterday, the MTBE is running at 95% asset utilization. So we continue to optimize, to maximize because MTBE is highly profitable today. So this gives you some feel of MTBE margin. Let's go to the next slide. I think this is an important slide for you to understand what is the MTBE -- the MEG business. MEG is majority produced from naphtha based. See on the left-hand side, 2011 to '18, the average spread of MEG is $500 per ton. I'm talking of Asia integrated MEG, which has dropped to $122. So what the heck is happening here? So what has happened, there was a lot of capacity got built up, and the problem was poor demand and the polyester staple fiber in China locked down. So this is the problem which we are facing right now. We have low cracker spreads and low MEG spreads, but they cannot be -- the reinvestment level is very high. As you can see, historically, it has been 500. So we are at the bottom of the cycle spread COVID in 2020 had some further impact but margin this year. However, with the extended China lockdown and over 70% of the MEG going into fiber dropped, as I said, $222. On the top, you see the North American margin. We have higher spreads versus Asia due to the Shale gas advantage. But again, on the right-hand side, you can see that Shale gas advantage reduced because of the high ethane cost which dropped to $192. So the integrated spreads dropped to $468 in America. So although the naphtha-based crackers in Asia are not making any money, negative EBITDAs on MEG, we can still -- we have also not a positive EBITDA but less impact. But today, MEG is not a sustainable level. The current levels are totally unsustainable with even the lowest cost players. I'm sure you must be tracking the results of the players struggling to break even, and we therefore see an upside because this cannot remain like this from both improved MEG and ethylene crack margins. So both are rock bottom right now. Let's move to the next slide. Now let's go to fiber, which is not a great news. The fiber segment achieved a bit of $55 million in second quarter, a decrease of 35% quarter-on-quarter and 15% year-on-year. You see the major impact coming in Lifestyle fibers due to slowdowns in the economy, core EBITDA, mainly from Asia due to market weakness from China lockdowns and the exports freight are highs or restricted exports from high freight as well as the high energy cost in Europe, which we could not pass on completely. So what you saw on the bridge, mainly was passed on in the Combined PET business, but in fiber, we could not price completely. Hygiene verticals was impacted at Avgol Russia because the Russian operations were operating lower and the lag loss, which I mentioned to you about the polypropylene $10 million quarter-on-quarter. In mobility also, there were lower volumes in Europe, but more than -- I mean, we see a favorable product mix and despite high energy costs. So here, we could pass on. So you can see that mobility was $17 million, $17 million, quite flat. Here, we could pass on the energy cost. Looking ahead, what do we see in this business as Lifestyle fiber, the China opens up, the festival season comes in India. We see the Lifestyle picking up, continues to face and -- but in Europe, we continue to see -- face the headwinds due to high energy costs, and semiconductor shortage will result into mobility under pressure. So we are not -- right now, in the third quarter, we don't see a very big upside in the fiber business. But as we see in the fourth quarter, certainly, we see an improvement coming into the fiber business, and the Olympus is a continuous focus on that. Let's go to the next slide. I think this is an important slide on Olympus. We continue to have very strong delivery of Project Olympus, cost-saving excellence program. We exceeded our target set out last year, as you can see, $291 million. Today, this year, we are already at $462 million run rate. We expect to achieve $500 million or more better than that. And as we said that we only date up to '23, but now this is an embedded program. In '24, we have a $650 million to $690 million run rate on this. So this cuts across all the profit drivers across all regions and segments as similar intensity. It is crucial to our success to remain in the first quartile cost position, especially in the commodity business. We are continuously investing in improving our cost structure with our renewed focus towards indirect spend, involving top consultants, procurement team along with the category managers, which are confident to unlock more value. So the Olympus program is right on the track, and we see this creating -- unlocking a significant value. Let's move to the next slide. Well, as you saw the 2030 VISION, we have been investing in the sustainability of our people processes. I'm very pleased that yesterday, we rolled out -- released 2 of SAP HANA 4, which is successful, very good rollout as compared to release 1. And this is basically moving the organization towards a digitally agile organization, enabling operational excellence making smart decisions on selling value pricing and the 6 enabling function continues to focus on improving the company's future readiness program. Let's move to the next slide. As we continue our journey of industry leadership in sustainability, this quarter saw some notable developments. IVL became a founding steering committee member of the recycling partnership coalition, industry-leading companies. I will also announce its commitment to science-based targets. By 2030, the company aims to reduce the GHG emissions by 30% and to increase renewable electricity consumption to 25%. Along with this commitment, IVL has set -- has set on the chemical expert advisory group to develop a sectoral decarbonization approach. So we continue to focus on our sustainability drives. As you can see, we raised about $1.3 billion of loan from diversified ESG financing. So very strong focus on sustainability. Next slide, please. Important deleveraging. Our net debt to equity, as you know, increased from 1.03x in first quarter to 1.25 when we acquired Oxiteno -- as soon as we acquired Oxiteno and now has reduced to 1.12 with higher EBITDA, and we saw the $900 million of operating cash flow. Although you may know that our highest working capital outflow is there because of very high prices. but we could reduce our net working capital by 2 days with our continuous focus on working capital. Post acquisition of Oxiteno, our net debt equity has peaked for this year, and we are expecting -- of course, as you know, we are at 1.13. We expect to be nearly 1 or below 1 by end of the year with free cash flow, and that's the goal. I talked to you about very strong operating cash flow of $900 million, which is nearly 122% conversion and reduction in the working capital cycle. Liquidity is very important. We have a very strong liquidity position of $2.73 billion. Risk against the fixed floating interest rate, 62% of our gross debt, it's fixed mature rate, minimizing the impact of higher interest rates in future. So that has been a continuous focus. And as I told you earlier, sustainable finance represents a significant opportunity for IVL close to 20% of our total debt at sustainability link. Of course, it gives our diversified borrowing base and also slightly lower cost. So very strong balance sheet position company has. Next slide. So what is the '22 second half outlook? There are headwinds, there are tailwinds. I think everybody -- you saw that what we could pass on the energy cost. Today, the energy cost remains record high. And the TTF keep going up and going down. We have been able to pass on the increases even if today's TTF remains and today's the U.S. high gas prices, our impact is only $40 million to $60 million, which as you can see that we have passed on earlier. And as you have seen, we have demonstrated in our last 12 months through Project Olympus and other risk management, we have been able to absorb this high cost. Second aspect is normalization of freight. Will it normalize? I mean, nobody knows right now because what -- China, you saw the export, 50% went into bulk vessels not on containers, which only went in the reduced freight. So that's another -- there may be normalization. There can be reduced consumer spending. 75% of our portfolio is not prone to that. So durable goods, there may be like propylene oxide that can be impacted. There's a recent duty reduction in Brazil, import duty, which may have some impact, but we will mitigate that impact by reducing the discount. And of course, as I mentioned, MTBE spreads to normalize from the current peak over the next month but still remained robust during this tight oil market. And as you saw, butane is at lower -- and methanol is lower. And ethylene and MEG spreads are low, so we see better spreads coming. What are the tailwinds? I think the biggest is the strong integrated PET margins due to high demand and low pipeline inventory. As I mentioned to you, that's the biggest. Right now, the integrated margins are about 300 million. Normalization of less mixed xylene prices, which basically impacted our PIA and PTA business, which has got normalized now in August. China reopening will certainly help in the Lifestyle business, and you saw the ethylene and MEG spreads which are at very, very low rate -- I mean, very low margins. And dollar should remain strong, which basically benefits us in terms of lower conversion cost. Finally, Oxiteno synergy, as I said, that, in spite of how very good performance, as you saw, $85 million, we are very excited with Oxiteno on unlocking the synergy values of $30 million by 2023 and $100 million by 2025. And there are many, many initiatives across this. So that's a tailwind and headwind. Next slide. So one way to may summarize. IVL's differentiated model and well-positioned portfolio has resulted in a platform that cannot be imitated. So we don't want -- we are a different company than the petchem companies. As the majority of our products serve daily necessities and markets, the strong predictability of our cash flows, ample liquidity and ratios well within the investment-grade rating give IVL the financial capacity through a cycle to make strategic investments. So we are well positioned to make investments. And we are always -- as we tell you that we want to double our EBITDA in 5 years. We successfully integrated Oxiteno, and the balance sheet is pretty strong. Today, IVL has built a resilient portfolio that is able to withstand and deliver superior value and volatile portfolio. With the purpose led vision driving us towards our '30 aspiration IVL stand out in the industry for our leadership as a sustainable chemical company positioned for long-term growth and returns. So that completes the presentation, Vikash, I'd like you to bring that slide on Coke and Pepsi because just to resiliency and then we can take questions. If you can bring that slide just to show you what -- and we can take the questions there. Please go ahead. So this slide, I wanted to show you, this is a second quarter result of Coca-Cola, Pepsi and Procter & Gamble. Their global unit case has gone up 8% and prices have increased 16% in the operating income. So what does it show that price increases have happened, passed on to the customers and still volumes goes up. So that shows the resiliency of the business of this people. Pepsi, also 13%, the 6% beverage volumes. Procter & Gamble is my customer for hygiene fibers and also for PET, gone up by 7% organic revenue. So necessities basically is required and even the inflation is there, we see a very strong results by this company. Thank you. We can take questions now.

Thank you, Mr. Agarwal. So we'll now take your questions. [Operator Instructions] So I can see Khun Komsun you have raised your hand.

I have 2 questions for D.K. Number one is, what is your CPET margin visibility. Do you see the margin going up to October or September? How does that compare to July number? Are we seeing seasonality factor kicking in yet? Or this time, it should be different from the others? And second question is actually on your MEG theory. What could go wrong on this one? Anyone in the industry -- on the MEG has started cutting production yet to -- if it is below cash cost or breakeven price, they should have been announcing by now?

Thank you, Khun Komsun. Let's take the CPET. This is a slide which shows you CPET margin from 2020, and you asked about the seasonality, you can see in October, November, December last year was a peak earning and what exactly resulted because of very, very tight material situation. As I speak today, I can tell you about July August. Chinese are sitting on very low inventory. You can see in July is $317. August is also hovering around same. And this is the number of days inventory, which is lying in China, which is very, very low, actually, if you see 25 days and 6.9 days. So if you want to buy any product or PET in China today, you can't get before October. Now remember, China hasn't opened up. So the demand -- China's domestic demand. So I can only tell you that the situation is quite tight and worldwide. And if you go back to that slide, the margin slide, fourth quarter, well, this is just a growth which we are explaining you, that how the growth in the industry has happened -- anyway, we can remain in this slide. This is the October, November, December, you can see. So seasonally, normally, it is weak, but because the market was very tight, we must see a surprise. Very difficult to say Khun Komsun right now. But trend, I can tell you that inventories are low and the situation is quite tight. And we are seeing supply chain issues right now. The second question was on your MEG theory. Yes, can you bring the crack margin spread slight? MEG margins are terribly bad. Crack margins in United States in second quarter was $0.03 a pound, which is very, very low. Now this is an MEG slide, which you can see that the integrated margin is $122 and $315 from the United States producers. So are people cutting production? Yes. There are some people who have already started cutting production. I will not like to name those players, but they are large players, integrated players. And we are seeing that cutting. Second is coal-based MEG in China is very expensive, and they are operating at 35%. This slide I wanted to show you what is the ethylene operating rate in United States, it takes 5 years to build a cracker. So 6 years before you can see a project. What happened in last few years, a lot of capacity got it in the United States. So in '21 84% was the operating rate, but because of polar vertex, effective rate became 90%. And you can see on the right-hand side, absolute right-hand side, 1% crack margin. The crack margins on spot basis was $750 a ton or NTP basis 600. And look at now second quarter '22, we didn't make any EBITDA in cracker, 0 EBITDA rather than lag chances and negative EBITDA. So re-economics level is $550. So you see a slowdown in investments, then -- as the ethylene demand goes up, you will see cracker rebounding back. So today, any integrated player is having significant losses, and you can see this in the results of many companies who have, and they are trying to cut the production. I think this has never happened in the history of MEG that such low margins are there. So hopefully, with China opening up, polyester demand coming back, I mean, look at $122 versus $511 to 18, I think there should be some improvement. But when, it's difficult to say, Khun Komsun. I hope I answered your question.

Yes. And my last question is that you mentioned about the resiliency of EU operation versus TTF. Any risk on volume -- gas volume in case of gas specially in Europe?

So gas, if we can bring that slide on the gas. I think we have operations in Portugal and Spain. Naturally, that they get their gas -- we are getting that slide on the deck soon. So there, it comes from African and LNG. So there is no impact. This is what exactly we are saying that EU constitutes about 12.7% of our EBITDA. You can see that Spain and Portugal, which is 4% of IVL is based from North Africa. So there is no risk there. And there is a price cap on the power supplies. You see Lithuania and Poland has actually gone a lot on LNG imports. So we see very limited risk. The risk is in Germany, which is 3%. But again, in Germany, again, because of necessities, we are defined as food and beverages. Necessities, we should be able to get those gas supplies. So Germany, I would say, a risk a little bit. Netherlands, there can be some risk. But rest of the world is not a risk and we can always supply from Egypt and Turkey, if such situation arises. And on the right-hand side, you have seen that what is the additional cost which we have incurred quarter-by-quarter, and we showed you $155 million. And we have actually one more slide that impact you, I want to show, that if the present TTF remains, I think this is the forward curve of European natural gas, you can see the bar on the green shows what we have hedged. The third quarter, we have reached 38%; fourth quarter, 21%, and our hedge price is that dot line. So -- and natural gas, we are also hedging for '23. So U.S. natural gas, also, you can see that we have been continuously hedging, which is much lower. On the right-hand side, you can -- you saw that in second quarter, we had a year-on-year impact of $155 million, and you saw the bridge which has already passed on much more than that. Q3 cumulative is lower. It's in the range of 140 to 160. So even if Q3 at 200 TTF and high prices, our additional impact will be only 40 to 70. But quarter-on-quarter, it's only 140 -- year-on-year is only 140 to 160. So it shows you that if today's TTF remains, then we may have additional impact, but you have seen historically how we have been able to pass on, and we'll continuously work on this. So that gives you some answer on the gas side.

I can see Khun Poom from Credit Suisse.

I have 2 questions. First one is on the supply chain issue that Khun D.K. mentioned for PET. Can you please elaborate on that issue like supply chain and -- I'm not sure whether you're specifically talking about Europe. And the second question is on ability to pass on the energy cost for PET. Like you mentioned it a bit already that you can do that so far. But I'm just wondering whether the situation has changed in the second half, like given that you might more import coming through and cost of production in Europe will be a lot higher than in the first half. So would that mean that there will be more competition coming in?

Thank you, Khun Poom. So supply chain disruption, which I was talking is that is still the lead time to get the product is very, very high from China, although as you saw the China exported a significant quantity and that is because there was no product available. There was only one product available from one country, which was China. And China basically moved this by bulk vessels. Bulk vessels means that you put your -- container shortage was there. So you put on the bulk vessels. But the lead time for those bulk vessels were very high. So that supply chain disruption still continues. As you can see, that 3.8 million tons got exported from China, which is a very significant quantity across different region. In North America, what -- your imports you see primarily comes from Egypt because China has anti-dumping duty and [ Trump ] duty. So it comes from Egypt, Turkey, Vietnam and all that. So that supply chain disruption still continues and customers, the last thing they want is a shortage of products. So we are seeing a regular trend in consumers to tie up domestically, and that we see in the coming year also. As I said, we have already contracted 33% in North America, in Mexico contracts that are better or same margins. And I would like to show you one PTA slide also. The second is the ability to pass on the -- so this is the PTA formula price. In North America, the PTA, they're only 2 producers, INEOS and us, and DACH does not participate into the merchant trade. You can see that PTA formula is linked to North America, inflation and fuel oil and labor. And you can see month-by-month how this margin has increased from $3.80 to $5.40 per ton. And there was a $0.04 formula price increase in first quarter, which was successfully passed on. In America, in U.S., it's not easy to import PTA. One is because everything moves by rail car, people don't have container and loading capacity. And that's -- and market is a very balanced market and tight market. Ability to pass on we have demonstrated in the past. If you see that bridge, if you bring -- yes, it depends how the energy cost will happen in the second half. As we are continuously hedging, we feel that we should be able to pass on. But maximum impact, I'm just saying if it doesn't pass on is $40 million to $50 million. But we don't see that situation happening as our management agility because we are making sure that some of our contracts are linked that we say that energy surcharge we're going to charge on it. So it's a very -- situation, but the downside risk even if you see is not more than $40 million, $50 million.

I can see Yupapan.

The first question is regarding gas cost. Actually, I'm not sure that I heard it correctly that the maximum downside is at USD 50 million. That you answer?

Yes. If we can go to the slide. Yes, a maximum of 200 TTF. And today, these prices is -- if we are not able to pass $40 million to $60 million. Can you go to the next slide? But you have seen that we have passed on $155 million, much more than in second quarter. And the cumulative impact is only $140 million to $160 million versus third quarter. So if I'm not able to pass anything, then that is my worst scenario. But I think we will be able to pass on. So we -- our management is very focused on passing on the cost. And if you can go to that bridge because that bridge is important, that first quarter '21 to first quarter '22, again. Can you go to the slide -- so I mean, that is the worst scenario, I'm saying.

I'm not sure whether how much of your total gas contract that you did in the second quarter because like gas cost started to spiked in the third quarter. So if -- does it mean that the gas contract that you lock in the second quarter, you will have some hedging in the third quarter?

Yes. So okay, we first look at this slide, that $155 million was the impact from quarter 1 -- same quarter last year, and our margin improvement is $377 million. So we have been able to pass on much more than that, as you can see, because of the -- of course, it's a blend of MTBE margins and everything, but that shows the ability to pass on. The second -- can you bring that slide back? Hedging. So we have been systematically hedging and our hedges are at lower cost. So you can see that green chart there. Third quarter, we are hedged at 38%. Fourth quarter is 31%. And even '23, we are hedged at 21%. And those red dots is the price at which it is hedged. So that significantly advantaged. Like, for example, in Europe, we have hedged at EUR 80, 38% of the gas. So similarly, down, you can see in the United States, it's at $5.15, but it is very much backwarded in America. But we have made a policy to continuously hedge in layers because things can be very volatile. It can suddenly drop also. So that what gives you that our cost will be blend of what is hedged and not hedged. And that is the impact which we are showing you.

My last question is regarding Oxiteno. I see that the contribution is quite good, came in at USD 85 million in this quarter compared to like normal contribution around $50 million. So that almost double the normal rate. I would like to know which is the key contribution to very strong profit for Oxiteno. And is that going to be sustainable?

Okay. Very good. Good question. So Pasadena, I don't know I just have to get you recollected, but Pasadena is a newly built plant by Oxiteno in United States. The replacement cost of that asset is $250 million. Now you can see this was negative because it was operating at lower capacity. And you can see in the last 12 months, this is $9 million Pasadena has earned -- this is LTM. In second quarter itself, it has earned $6 million, and we are seeing continuous improvement. Why we have -- what we have done. So one is we turned around. We have the product mix, and it doesn't include yet the synergy benefit of EO supply, which will start from first quarter '23 when we'll supply our own EO from Clear Lake, Texas, so which will unlock another $20 million annual because of the difference between glycol margin and EO margin. So that would be another one. The other major driver in is the product portfolio which they have, which is they had a lot of pipelines from the product, particularly in the crop solution and home personal care. Their oleochemical margins have been very strong. So that's why you see that is one of the factors of -- and we see that it should continuously keep improving -- mind it that second quarter in Oxiteno, they buy ethylene based on North Europe and which was one of the highest, which shows the capability of passing on the cost. So it's product mix. It's value pricing. It's the type of products which they have in the pipeline, this is not a standard commodity products where the margins are -- contribution margins are very, very high. And that is what is getting reflected in their earnings. So that's why you see a turnaround in Pasadena as well as the product mix and the cost efficiencies which we are bringing in there. And slowly, this is a regular process as you go into the different -- next year, we'll continue to unlock more synergy values. And there are hundreds of initiatives which has been identified like common procurement, natural alcohols buying, the indirect procurement, the SG&A cost reduction. So these are all -- there are many, many initiatives. So that's why $100 million will come. And the second quarter, which you saw is a combination of all these factors. And remember, Oxiteno also produces also glycol. So glycol was negative in this. So that was a laggard in Oxiteno. They produce a very small glycol. Hopefully, that answers your question.

Yes. do you have any follow-ups?

No, no.

So in the meantime, Sumedh, before we come to you, one question which has come from fund in Thailand. So what's the breakdown of $85 million, Oxiteno into downstream and intermediates? And how much MEG contribution? Is it loss-making? And how much so? Yes. So Oxiteno is like...

It's predominantly -- total $85 million is downstream. The MEG must be a breakeven EBITDA because they sell MEG only for very specialized applications. They don't sell in commodity markets. So it's a very, very -- if MEG margin improves, yes, that can be an upside for Oxiteno. But yes, that is totally downstream.

Sumedh from JPMorgan. Can you ask a question?

I have a few questions actually. Firstly, let me kick set one by one. But specific to your PET margins in the U.S. on contracted basis. I'm not sure, but do you start to see any impact because Corpus Christi is where you have started to see some construction activities? And the other corollary to this is just housekeeping exercise. How do we consolidate? Or how do we show Corpus Christi in financial statements? Is it going to be proportionate consolidation or associates? That's my first part.

So Corpus Christi is coming in first quarter '25. You saw the significant imports in the United States. Of course, there is no bearing at all on the current negotiations of the contracts which we had. As I mentioned, 33% of the contracts have been locked in, in U.S. and Mexico at prices same as '22 or slightly better as integrated PTA/PET. The Corpus Christi it is a capacity reservation. So it will be sort of an equity accounting. Of course, that will sit on our balance sheet, but it will be mostly -- it will be equity accounting and it will be basically a tolling agreement. So you basically get the product on a toll basis. So there will be sales, and EBITDA will get consolidated at 33%. So one is 33% equity accounting on the profits which we made in the Corpus Christi and then you buy on a cost-plus basis. So that profit will come and the IVL is 100%. Yes, proportionate consolidation, you can say.

Yes. So it's a proportionate consolidation. Got it. Can you also give us the CapEx guidance for this year and next 2, 3 years that you may have?

CapEx, can you bring the slide? So CapEx primarily is on the recycling and the Olympus project and Corpus Christi. Can you bring the slide? This year -- we're just bringing the slide up. Okay. So this year is expected to be about $1.8 billion to $1.9 billion, which you see '22, which includes Oxiteno acquisition, includes Vietnam acquisition and the Olympus and S/4 HANA, of course. And next, we are talking about $500 million and '24 is 400, which includes $150 million deferred consideration, which you had to pay. This is on a cash flow basis. And the maintenance CapEx on top of it will be about -- this is growth CapEx will be about $400 million, roughly. This does not include -- this is including the total recycling capacity which we are bringing it up to 600,000 tons. And I just want to remind you that recycling hasn't created that return, which we are targeting. As we are expanding our fleet capacity, we are integrating, you will see the results coming into the coming quarters.

Right. And my last question is on the rising gas prices in ethane. And sorry I think gas prices in the U.S., and I'm talking specific to ethane, the feedstock. Is there any way you can hedge that as well? And second, when you have your downstream business in the U.S., does it get impacted in any way through higher ethane prices?

Sumedh, let me first ask you the last part. We pass on the entire cost of ethylene to our customers, and you saw that into IOD downstream results as well as Oxiteno downstream results. Oxiteno buy is based on European linked ethylene price. And you could see that $85 million came in spite of very high ethylene cost. So there's a total pass-on mechanism of ethylene. Your question was, can we hedge? Of course, I can go and hedge, but then I'm taking a speculative risk because if the ethylene drops and then I'm caught with the high-cost ethane, so we normally don't hedge such positions because we only hedge the gas to the extent of conversion cost because we know that this conversion cost is going to play an important role in our overall profitability. So ethane, yes, you can hedge, but then you take a speculative risk because it can always drop. Gas situation in the United States, we did some study. That is a backwardation. If you can bring the draft, the gas supplies are increasing. Of course, there is a lot of LNG terminals getting built in the United States. So there is export, both happening. So we don't want to take that speculative risk on ethane. As you can see how volatile is the margin and you can see the backwardation that today, in '23, if I buy, I can buy at $4.70 plus or $5 per million BTU. But we are continuously hedging for our conversion, but we don't hedge ethane. And if you go to the previous slide, that crack margin, and you saw that crack margin slide that how much crack margins have dropped in second quarter because of surplus ethylene in the United States. Yes, this slide shows you that used to make $700 per ton is now $100, so $600 per ton gone for my 650,000 ton capacity. That's the impact in the second quarter.

There's a question online from Khun Amornrat from CIMB. So what is the average hedge price for TTF and Henry Hub?

Do you have the number?

Yes.

So Vikash will answer that question.

So if you go to Slide #57 -- 37.

They wanted the average hedge price.

Yes. So on the next slide. Go to the next slide? So in the third quarter, fourth quarter, you can see our hedge cost is about EUR 70 in that range. And even for the next year, is it very similar to that cost and Henry Hub for third and fourth quarter is in the range of about $7 and next year is about $5.

So you can see that today, is EUR 200. Our hedge price for Q3, Q4 is 70, 80. So it's quite well hedged, but that's only 38% -- 31%. And the United States, Henry Hub, we are at 6 plus.

Thank you. There are no more questions at the moment. So maybe if anyone has any more questions, you can ask it now. So yes, so there are no more questions...

Vikash, can I have one quick question on Fiber business? Should we expect that the situation of the margin squeeze will continue or it pretty much depends on China, if it reopens, then things will improve?

Khun Poom, you're talking about the Fiber margin or?

Correct. Yes.

Fiber margin. So Fiber margins are terribly bad right now because the polyester operating growth in China is because of the lock out is quite low. Pipeline inventories are tight. So as soon as they open up, and I think even in India, as the festival season comes, we think the margins will start improving in filament as well as staple fiber, both. Chris, do you want to add something?

No, I think that's a fair reflection. I think it's cautious optimism. We're not out of the woods yet. We know why we're in the position we are. D.K. has already mentioned a number of those external headwinds. So I don't focus on them, but I'll focus on what we're doing, within a business of which I think the team are doing an excellent job. We're focusing on getting our operating efficiencies as robust as we can. You saw in Olympus, we were over-indexed the savings generated by the segment. We are being very speedy in terms of our decisions in regards to our portfolio range and optimizing that range. And if you look at the external market, yes, we're confident that China opening up will have a positive impact relative to H1. India, particularly in quarter 4 relative to H1 looks positive. What are we cycling from H1? We're cycling not just for COVID but the negative lag, and we're seeing polypropylene prices coming down. So that's a positive cycle versus H1. So it's cautious optimism. We flagged there that we're not out of the woods yet. Some of the external factors that we're experiencing right now are not going to go away overnight, but we're taking immediate swift actions in terms of what we're in control of.

I can see Mayank from Morgan Stanley.

Vikash, can you hear me well?

Yes, yes.

Okay. So I think a couple of things from my end. First was can we just talk a bit about the balance sheet management side now going forward. And can you just give us a bit around your CapEx guidance for 2023 as well?

Okay. Very good. So on the balance sheet side, you saw that the debt -- net debt has been lower around $6.8 billion. Of course, you want to bring that debt slide? Can we bring the debt slide up, the debt slide, no, the other one, the movement? Yes. So I think naturally, there will be a strong operating cash flow coming in. Remember that this working capital is higher because of the high prices, which we have right now encountered in the same. So you can see that this is the bridge. That $4.5 million was the -- $5.9 million was the net quarter in the first quarter '22. So we had this core EBITDA and the net working capital result. So we -- net debt after OCF should have been $5 million. Maintenance CapEx is $137 million, and we paid $1.5 billion for Oxiteno and Packaging acquisition. Interest, dividends and of course, FX movements, we are at $6.7 million. So we think that we will deleverage further. So just to show you the CapEx guidance on the CapEx side. And of course, we'll be -- keep improving on our working capital cycle. So this is $1.9 billion, which actually we reviewed. It should be lower than that, $1.8 million to $1.9 million. and Corpus Christi will start kicking in, so $500 million and $400 million for '23, '24. This includes recycling investments, includes debottlenecking of PET capacity. And I mean, we are making one PET plant in India, which will be operational by end of this year. We're debottlenecking some of the plants and Olympus. So all this includes all those CapEx -- growth CapEx, and maintenance CapEx will be about $400 million. So Mayank, hopefully, that answered you.

Yes, so I think so is it fair to say that, next year, if you kind of think about your net debt number, it will be significantly lower than what it is today?

Of course, that's why we are predicting that if we go to '24 blended slide, we should strongly deleverage with the operating cash flows, which are getting thrown out. You can see in the fourth quarter '23, we are showing -- and actually fourth quarter '24, further deleveraging. But remember, we are a growth company. We see a lot of opportunities. But of course, based on this, it will strongly deleverage.

Got it. And sir, can you just talk about the opportunities you're looking at in terms of growth as well from the inorganic side for the next few years? Anything targeted that you're already seeing around?

Mayank, I think that's a good question. What we did in PET, we bought so many assets around the world. We consolidated. We emerged as the largest player in the world with 20% market share and which certainly cannot be imitated by anybody because with the strong position which we have. And actually, today, except Corpus Christi and a small plant being built in Turkey, there's not much capacity getting. So this gives you a very strong position. We think in Integrated Oxides derivatives in this downstream business. Post Oxiteno, now we have created highest play in Americas. Now this is not -- this is a very, very value-added business. You're talking of R&D customers like Syngenta for our solutions; Procter & Gamble, all these companies whom we give solutions. There's a good opportunity to expand this business into Europe and Asia with -- and upstream integration. We are big buyers of natural alcohols. Our shift will be to move right-hand side of the curve more to get more specialties into our platform. We have just completed 4 months of acquisition, mind it. And you saw the results of Oxiteno. The journey has just begun. And the team is very, very talented, which we got. And I think there are a lot of opportunities to grow this business. We don't have antitrust hurdles. We do have hurdles in combined PET because we have a leading position in U.S. and Europe. Fiber, we are still taking a stock, as you can see that we want to first improve the existing position. So anything acquisition, which will look probably or growing will be in IOD field. And there are a lot of areas which you can. You might have recently seen an announcement about tying up Capchem on this electric batteries, this is another value-added project, which is for CO2 and ethylene oxide you capture, so which not only improves the sustainability but create a value-added projects. So we'll continue to work on this.

Got it, sir. I think the last question I had was in terms of, I think the U.S. overall portfolio, correct? Once you have the entire Oxiteno plant in the U.S. coming through, what kind of upsize you kind of think to this $85-odd million EBITDA that have kind of got from Oxiteno?

So the $85 million is a quarter. And naturally, if you may say this is -- this is without synergy of $100 million, which we are looking at unlocking within the 2. Now you've asked, what is this $100 million coming from, where? One of the big basket is they buy ethylene oxide from another supplier because they had a contract, which is finishing by end of this year. So '23, we'll supply our own EO that unlocks a significant value, as is like $20 million. Then there is a lot of cross-selling because they sell products in Europe, we sell product in Brazil. So those cross-selling, how do we optimize that SG&A. How do we roll out the products? They are very good in crop solutions. They are good in coatings. How do we do that in Asia? So there are a large number of initiatives. As you can see, the 100-day plan on the track on the right-hand side, there are 160-plus initiatives has been identified. And we have rolled out the new organization, so indirect procurement, establishing the operating cadence. We still have a TSA with Ultrapar, which we want to come out of it. And so these are all synergy. And actually, if I tell you, the $100 million number has gone increased up, but I don't want to say that -- but we are very confident of this $100 million. So then you add up as a total value of the company, if IOD makes EBITDA of high $800 million plus, then you end up another $100 million on top of it. So it's a very important vertical which is emerging in IVL. That's what my point was.

So I don't see any more questions here. So we can -- thank you very much for participating and taking out your precious time for the second quarter results. We do look forward to see you in third quarter. And please don't hesitate to contact our Investor Relations department. If you have any questions on anything, please don't hesitate. Thank you very much. Appreciate it, and have a good evening. Thank you.