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

Welcome, everyone, and good afternoon. Thank you very much for taking time to join us for Indorama Ventures Third Quarter '23 Results Briefing. My name is Vikash Jalan, I am Vice Presiden, Investor Relations and Planning. Joining me today, starting with the left, Mr. D.K. Agarwal, Deputy CEO and Group CFO; Mr. Aloke Lohia, Group CEO; and Alastair, Executive President for Integrated Oxides and Derivatives segment and Chris Kenneally, Executive President of Fibers business. A quick disclaimer that meeting is being recorded, and a replay of this session will be available on our website after the meeting. We have made a few assumptions and estimates on future trends for industry and business which are based on our analysis at this point in time. So I now invite Mr. Agarwal to start the presentation for third quarter results. Over to you, Mr. Agarwal.

Thanks, Vikash. Good afternoon. Can you hear me? Okay, sorry. So I know some people are stuck in traffic, but I hope you are able to connect and hear this presentation. So before we begin, let me share with you a truly magnificent milestone in the history of Indorama Ventures. We have now recycled 100 billion PET bottles, resulting in 2.1 million tons of waste diverted from environment and 2.9 million tons in carbon footprint reduction. In 2011, our recycling journey started with the very first PET bottle recycled. As it is true to our Indorama Ventures' DNA, we started small with a daring vision to become a world leader in recycling. Today it's a testament that we can reimagine chemistry together to create a better world. Each year since then, we have invested in expanding our recycling capacity as we knew PET recycling is a key part of developing the circular economy. Aligned with our Vision 2030, we now have 20 recycling sites in Europe, Asia and Americas. We are researching innovative recycling technologies to build on our sustainability leadership. Today, we remain committed to our target to recycle 50 billion post-consumer bottles per year by 2025. It's important to begin with an overview of the macroeconomic environment, which is prevailing, which is quite challenging, and the key external factors influencing our performance. In quarter 3, we continue to strategically navigate through a global economy, contending with a combination of high inflation and increased interest rates. The lower manufacturing PMI continued to be seen in Europe, while U.S. moves into neutral territory. After a deflationary Q2, Chinese economy showed some stability in Q3, but growth remained lackluster amid a persistent housing crisis, as you're aware, there have been a housing crisis in China. However, with the recent fiscal actions, China is seeing early signs of growth suggesting a positive shift in policy direction to further stimulate the economy that is still to be seen. IVL observed industry operating rates prevailing at around 70%, likely the lowest level historically, while industry margins are also at the bottom. This phenomena, in our opinion, reflects the high inventory levels in this system, so these are the rock bottom margins, as destocking remains to play out, leading to lingering underperformance by the industry. The view is supported by the chart on the top right-hand side, showing that the industry as a whole is still under stocking in third quarter '23, we can see on the top right-hand side chart. Moving to the topic of energy prices, strong oil prices and normalized gas prices sustained U.S. gas advantage and lowered energy cost. Rising crude oil prices quarter-on-quarter also resulted in inventory gain for IVL this quarter. Lastly, as you know, the strengthening of U.S. dollar has favorably impacted IVL's financial and making conversion costs in emerging markets more competitive. As you know, we have assets in those emerging countries where the currency has benefited. This occurred as both raw material and product prices are dollar denominated, providing us with a relative cost advantage. So this is macroeconomic landscape. Now let me take you through the highlights of this quarter. IVL posted third quarter EBITDA of $324 million, an increase of 1% quarter-on-quarter, a decrease of 37% year-on-year. Average Brent crude oil price for the quarter increased to $87 a barrel, resulting in an inventory gain of $24 million. As you know, IVL is part of the global industry, and one of the largest at that, and our volumes saw a drop of 5% year-on-year because of the destocking trend that I highlighted earlier that destocking still continues. Now let me give you an overview of what we saw for each of the segments. CPET results were impacted due to unprecedentedly low benchmark PET margins, increased feedstock prices in the Western market due to octane disparity, and significantly lower margin in Europe and Brazil due to import pressures as container freights came down. In IOD, the downstream business saw reduced volume on account of destocking and inflationary pressure as well as margins pressure on certain product categories such as solvents, LAB and Oleochemicals. The intermediate business saw MTV spreads expanded quarter-on-quarter, driven by strong octane value. Our integrated MEG business maintained its advantage over Asia, leveraging on U.S. shale gas. Nevertheless, spreads remain suppressed with Asia benchmark, declining quarter-on-quarter. We also have some naphtha-based MEG in South America that impacted us. Bear in mind that for IVL, the MEG business is an integral play with CPET, and we are running our MEG capacities to fulfill our captive demand. The Fiber Lifestyle business experienced growth in India and Indonesia, but faced margin pressure due to competition from China. Increased volume is certainly a positive sign, indicating a recovery in the polyester value chain. Mobility fiber used in car tires and airbags saw mixed demand, with OEM sales up, but replacement tires down particularly in China. The recovery in the automotive industry, our volumes are likely to expand. The vertical performance was supported by resilient margins, cost savings and gain from onetime insurance income of $11.4 million to fire a previous year. Hygiene fiber business in Europe was impacted by inflation and low demand, plus underperformance in Russia because of geopolitical tension. However, declining polypropylene prices positively impacted this quarter's result. The Hygiene vertical will be ramping up their expansion in India to capture growth in emerging markets. Amid the volatile economic environment, which we are experiencing in 2023, our management actions continues to be on prudent financial management, and we are pleased that this, in September this year, TRIS rating agency reconfirm of our rating at AA- win -- minus with a stable outlook. So this was quite heartening. These management actions have resulted in positive free cash flow of $79 million YTD and $52 million for 9 months ending '23, after a dividend payment of $51 million for third quarter and $166 million for 9 million (sic) [ month ] '23. This is led by gross working capital days reduction by significant 13 days. As you might have observed, in 2021 and '22, free cash flow was negative due to increased inventory volumes, higher feedstock prices and acquisitions, namely Oxiteno. Our current inventory level, we believe it is still above historical levels, indicating that we still have some room for further reduction and thus working capital release. Going forward, with continued prudence on interest costs, CapEx, combined with further improvement in gross working capital days, we anticipate further increase in free cash flow, so whole focus is on free cash flow. Let me provide you with more details on very specific management actions. Management is taking aggressive actions on cash conservation, which is the need of the hour. Apart from this reduction in gross working capital expenditure, plan has been reassessed and reduced by $210 million over what was committed our Capital Market Day earlier this year. In aggregate, we have achieved 92% to date of the $500 million target saving stated at the beginning of the year, coming from both working capital and reduction in CapEx. We will continue to maintain the same discipline on cash conservation efforts in 2024. In light of the rise in benchmark rates, we have successfully refinanced $1.6 billion throughout -- through raising long-term debt and mix of currencies, which has reduced short-term maturities, extend debt maturity profiles and optimize cost of debt. $11 million interest cost saving is a result of this activity. In addition, we are reviewing a few strategic options to deleverage our balance sheet and enhance shareholders' value. We are doing a holistic review of our business segments with a view to unlock their future growth potential. The review will take into account the historical trajectory of the business, their long-term strategic growth perspective within the IVL portfolio and explore opportunities for optimizing value creation. As part of the process, we are reviewing all possible options, including strategic partnerships to generate the maximum value for IVL shareholders, and we aim to complete the full review within 2024. This quarter, as you might have noticed, IVL, along with our joint venture partners, made the decision to temporarily pause construction at Corpus Christi Polymer, an integrated PTA/PET to site in Texas amid cost inflation, high interest rates and labor shortage. In the interim, IVL is dedicated to robustly fulfilling our customers' needs, leveraging our extensive network of local and global resources. United States still remains a significant deficit market. Management continues to assess the cost competitiveness of each of our sites and decisions taken to optimize our asset footprint will further drive performance improvement via fixed cost reduction and improved operating rate. To maximize the profitability, we continue to evaluate make or buy decision across all segments. Following a detailed view of the make or buy decisions of our PET assets, we have chosen to mothball our CPET site, the PTA site in Portugal, anticipating a fixed cost saving of $17 million by 2024, this is per annum. We'll continue to review of the regional profitability of all para-xylene and PTA and PET assets, taking any necessary steps to ensure profitability is restored. Coming to the Fiber segment, it is on track with its footprint optimization plan announced at the beginning of this year. Additionally, the Fiber segment is undergoing an organizational reshaping to drive performance improvement through 2 pivotal initiatives. Chris will cover that in detail. Firstly, a segment centric organization for a leaner and more agile structure, which in turn will increase the speed of decision-making and enhance collaboration across the segment. Secondly, establishing 4 operational priorities with a heightened emphasis on EBITDA and cash flow enhancement. These priorities will have a dedicated resource leading each initiative with the support of cross-functional team to ensure the right collaboration and Lean Six Sigma Black Belt to ensure a disciplined approach. We'll keep you updated on Capital Market Day. We are committed to drive the synergy benefit of the Oxiteno acquisition. To date, we have achieved $51 million synergy benefits and are confident in achieving the targeted $100 million by 2025. We also continue to look at optimizing the business portfolio by using the low-cost production bases and shipping to other region as well as ongoing networking optimization particularly of surfactants effects in North America. Innovation and sustainability remains a priority for Integrated Oxides Derivative business as we continue to offer value-added solutions to our customer. Project Olympus reflects our relentless pursuit for efficiency improvement, as you can see, delivering our run rate efficiency gain of $502 million to date. This program comes to an end in 2023. And at the end of the next Capital Market Day, we'll share the detail of Olympus 2.0. And this is to unlock additional savings, leveraging on the new SAP backbone, digital programs and the work done from Olympus 1.0 around indirect procurement, efficiency improvement, pricing excellence. Our SAP rollout, which we are very proud, continues with the full steam, with more parts of our ASEAN business having now transitioned to the new SAP system. With this roll out having been completed, almost 60% of our revenue is now covered under one common operating system. We hope to complete this in the middle of next year, the entire SAP rollout. Next slide, please. Now let me briefly touch on the outlook. This year, our sales volume faced challenges due to difficult market conditions and destocking effects across all markets. As you can see, additionally, we took steps to streamline certain uncompetitive assets in Europe in fiber and PTA, contributing to the decline in the volume in '23 versus '22. While we anticipate some relief from inflationary pressure, we do not expect a significant recovery in the economic environment in the final months of the year during the ongoing macroeconomic volatility. Looking ahead to 2024, our management expects improvement in volume as destocking eases across all segments and a modest market recovery with improved margin. Another challenge, we believe gasoline demand will begin to destabilize going forward as post-COVID activity normalized, aiding our Western Polyester business. Our Western Polyster business got substantially impacted due to the high cost of feedstock. Furthermore, with a recent stimulus action in China, we foresee improved product demand, thus improved operating rate. We forecast a year-on-year volume growth as reflected here on the back of higher operating rate in '24, with upside from the ramp-up of our expansion project, including PET project in India, and the Fiber expansion and Hygiene and Lifestyle in India and the United States. So that gives you some indication about the volume. This slide is showing you over the cycles what has happened. The operational landscape in recent years has been marked by continuous disruption. I think disruption has been a continuous. In 2018, we had the China waste import win, which notably enhanced polyester profitability. I guess you can see, we achieved $149 per ton. By the close of 2019, the unforeseen COVID-19 pandemic emerged as a black swan event, starting off further economic shock waves. The pandemic caused supply chain upheavals, followed by a phase of normalization characterized by cycle of restocking and the current destocking environment. So you can see '21, '22, we achieved the peak. Amidst this development, the Russia-Ukraine conflict emerged, and now Israel issue, leading to an energy crisis in Europe and octane shortage in the western world. Then came the post-pandemic boom followed by subsequent inflation, rising interest rate and dampened economic environment by 2023. So it's a perfect storm, which we have right now in the industry. Despite this tumultuous external influences, the robustness of IVL's platform, the dedication of our people and the resiliency of our system strengthened over the years has helped us to achieve an EBITDA of approximately $2 billion throughout the cycle. So this gives you some historical perspective. Now coming to the results. IVL posted third quarter EBITDA of $324 million, as I mentioned, an increase of 1% quarter-on-quarter, a decrease of 37% year-on-year. Average Brent crude oil price for the quarter increased to $87 million, resulting in an inventory gain of $24 million. IVL consolidated sales volume has remained flat quarter-on-quarter at 3.56 million tons, but a decline of 5% year-on-year, as I mentioned, as a result of destocking impact in some IOD downstream markets, planned turnaround in IOD intermediates, particularly in the Clear Lake taxes for recapitalization, and rationalization of certain European Fiber and PET assets. While EBITDA remained flat quarter-on-quarter, supported by strong MTV margins and inventory gains due to high crude oil prices, negated by record low Asia integrated PET margins, as I mentioned, widened regional octane disparity and poor IOD downstream performance due to destocking impact on certain product categories. I want to highlight that the strength in MTB performance provided sort of a natural hedge against weakness in Western and Brazilian polyester business due to high feedstock. This octane disparity really hit hard on the Western polyster business. Note that the EBITDA figure includes a hedging loss of $29 million. This is energy hedging loss. I just want you to highlight again, in third quarter and upto 9 months is $78 million. Energy hedging continues to impact our performance. So you should normalize this earnings from that. But this is expected to normalize as we move into 2024 as mark-to-market on our hedges is neutral. We also had $12 million FX extraordinary losses in third quarter due to exchange losses relating to trapped cash in Nigeria and Egypt, particularly because these countries are very difficult to remit out the money. So this is onetime extraordinary FX loss. Now it is important to look at regionally. This is the regional breakup of the performance of IVL. Looking at performance on a regional level, there has been a variety of factors at play this quarter. The European operations in combined PET and fibers having the most negatively impacted, and you can see the European is running into negative territory, from a combination of cost, margin and import pressure. The disparity between mixed xylene price or the feedstock prices in Asia and the Western economies has widened by 76% quarter-on-quarter, leading to substantial feedstock cost pressure and competition from lower cost-based imports, particularly from China and Asia. The North American market has remained, as you can see, has been the star, resilient with PET and MTBE performance, however, with some negative impact from compressed Asian PET and MEG benchmark margin, as you know, MEG is at a rock bottom. MTBE profitability was strong due to high gasoline margin and octane value, MTBE performance, as I mentioned, acted as a natural hedge against the MX feedstock price disparity that impacted the Western CPET business or the Polyester business. On the other hand, despite shale gas advantage, MEG margins remained depressed. The IOD intermediates portfolio is closely connected to the CPET portfolio because it's a hedge towards our CPET -- we produced for CPET. We also want to highlight Brazil's performance. This was adversely affected by imports in certain product categories, resulting in margin pressure, the strengthening currency impacted our cost competitiveness. Additionally, persistent destocking, particularly in crop solution market, continue to exert pressure on volume impacting the IOD downstream business. Looking ahead, government support for local production to increased duties will counter competition from imports. The primary objective for this region is to strategically transition, which Alastair will cover in the portfolio towards differentiated products, leveraging on Brazil's strength in bio-circular offering, they are a producer of bio-ethylene. Our Naphtha-based MEG production, as I mentioned, in South America, experienced low margins. Although volumes in Asia increased quarter-on-quarter and year-on-year, compressed benchmark margins kept profitability for the region subdued. And Lifestyle made meaningful volume improvement this quarter, an early indication of the revival of polyester value chain, as I just mentioned in the Lifestyle and the Fiber. So this gives you a regional breakup. Now going into different segments. CPET achieved EBITDA of $146 million, a decline of 25% quarter-on-quarter and a decline of 33% year-on-year. CPET saw volume drop of 1% quarter-on-quarter and 5% year-on-year, still as we see the lingering destocking effect. As I mentioned, our Western market continued to face feedstock price disparity, lowering our cost competitiveness to Chinese imports and thus impacting margin. Access PET capacity in China continued to put pressure on integrated PET spreads. Chinese spreads, we never saw this in the history of business, which were around $201 for first half '23, fell further to $115 in third quarter '23. We previously noted that spreads we have observed in recent months are some of the lowest on record, and we believe these narrow spreads are unsustainable. What we have recently witnessed is a temporary shutdown of around 4 million ton China's production, which is 25% of their capacity. The operating rate has been reducing to the 70 percentage range. Recent news according to the Wood Makenzie's recent report, a preliminary antidumping duty, which we have been talking to you, of to 6.6% to 24% had been imposed on Chinese import, which will be effective from end of November on all imports in Europe from China. Additionally, as I reported earlier, Mexico announced a 25% duty on PET, and Brazil has raised import duties to 14%, with a further protective measure under consideration by these countries. So many countries are taking protective steps to protect their markets. And as we reported earlier, IVL, along with other partners, has decided that Corpus Christi to temporarily pause construction, it's partly completed integrated PTA-PET plant to manage the challenging environment related to cost inflation, high interest cost and labor shortage. IVL and the partners will continue to assess options to optimize the project. In the interim, IVL is dedicated to robustly fulfilling our customer needs from our extensive network of local and global resources. Coming to Packaging, the Packaging vertical faced pressures on account of availability of freely convertible currencies in a few key markets like Egypt, Nigeria, negatively impacting our volume growth, which declined sequentially by 5%, but grew year-on-year by 2%, Vietnam and Myanmar leading the growth. So we saw a drop in Nigeria and Egypt, but growth in Vietnam. Specialty Chemicals saw a decline in profitability due to lower volume in our specialty product, NDC in the U.S. due to planned TAR. Now this plant has since started after the planned turn around. The segment from energy perspective, was impacted $15 million during the quarter and $37 million for 9 months ended '23, so that's the hedging loss, which you can normalize. This quarter, management has taken the decision to mothball the PET asset in Portugal, which is expected to result in $17 million of annual fixed cost savings by 2024. And as I mentioned earlier, we are further reviewing our CPET footprint in this challenging environment, particularly in Europe. Next slide. On this slide, I would just like to highlight that approximately 75% of Chinese PET producers are not integrated in para-xylene. I mean they are either integrated PTA or they are stand-alone. The current level of industry PET spread is deemed unsustainable, especially for the non-PX integrated players, which is leading to production cut in China, as I just mentioned. Recently, there has been a temporary shutdown of approximately 4 million tons of capacity in China, which constitutes 25% of the Chinese capacity. The existing spreads still remain significantly below historical average, and we don't expect any substantial recovery in the fourth quarter till this inventory gets normalized. Next slide. Now this is the premium spreads breakup regionally. As you can see on the first chart on the left, despite compressed industry margin, IVL has managed to uphold a strong premium over the market. As of today, our year-to-date premium margin, this is Delta, stood at $190 per ton. This is attributed to our geographically diverse footprint, access to premium market and very strong customer relationships. Our European operation, as you can see in the slide, has been most negatively impacted from a combination of cost margin and import pressure. The octane disparity between Asia and the Western economies has led to substantial feedstock pressure and competition from lower-base imports. The European Commission is currently at final stage of approving ADD measure, as I just mentioned, from China, and we expect to have this ruling by November end. According to Wood Makenzie, this range is 7% to 24%. North American market, which is dark blue, you can see remains resilient, although with some negative impact from compressed Asian PET benchmark margin and high feedstock prices due to octane disparity between Asia and the Western economies. So this high octane because of the gasoline has also impacted the Western results in Americas, particularly in Brazil, and much more. Next slide. Now I'll hand over to Alastair to cover IOD and then Alastair will hand over to Chris for Fiber. Thank you.

And thank you, D.K., and good afternoon, everyone. So the IOD segment achieved an EBITDA of $119 million, including an inventory gain of $4 million, an increase of 27% quarter-on-quarter and a 43% decline year-on-year. Sales volumes have decreased by 9% quarter-on-quarter and 10% year-on-year, primarily on account of the continued impact of the destocking as mentioned by DK. Moving to the integrated intermediates portfolio. This vertical comprises of integrated EG and MTBE businesses. This portfolio achieved $75 million in EBITDA, including an inventory gain of $4 million, an increase of 139% quarter-on-quarter and an increase of 332% year-on-year. U.S. MTBE spreads expanded quarter-on-quarter from $578 a ton to $892 a ton due to strong octane values with operating rates running at full. Our integrated MEG business remained advantaged over Asia due to our U.S. shale gas advantage. However, spreads remain suppressed, with the Asian benchmark declining $42 per ton quarter-on-quarter. For IVL, as you know, the MEG business is an integrated play with CPET, and we are running our MEG capacities mainly to fulfill captive needs and long-term contracts. Planned turnarounds and industry outage in this vertical had an impact of $9.5 million. Integrated downstream portfolio. This portfolio achieved $45 million of EBITDA, which was a reduction of 28% quarter-on-quarter and 77% year-on-year, driven by reduced volumes on account of destocking and inflationary pressure, and margin pressure on certain product categories, i.e., solvents, LAB and Oleochemicals. Our downstream business benefited from a 10% increase in demand and a 20% to 30% increase in margin due in the post-pandemic reopening and additional supply chain disruptions in '21 and '22. And in 2023, we are currently seeing the mix of volumes in the range of both pre and post-pandemic levels. This provides optimism for both eventual recovery and continued forward growth. Here some insights to the various effects experienced across the wide range of different end markets and regions we operate in. Home and Personal Care. In 2023, this business has remained intact, although the sector saw some inflation-led drop in volume as consumers switched to lower-priced products, which contain less surfactants. As inflation eases and consumers return to the premium brands, we expect continued growth of volumes in this portfolio. Crop Solutions. The sector was negatively impacted by destocking where the channel inventory was quite high in 2022. In addition, there has been some pricing pressure due to cheaper Chinese imports on the commodities products. On the Energy, Coatings and Resources, the North American market remained robust due to elevated crude oil prices, while in South America faced challenges from imports. We expect this pressure to ease as global demand and China demand improves. Meanwhile, trade measures are being explored to protect the local production in Brazil. And finally, on Construction and Consumer intermediates, due to high interest rates and generally high inflation, there's been a slowdown in this sector, leading to muted performance, specifically lower volumes in propylene oxide in North America. Planned turnarounds in this vertical had an impact of $7 million. So a few points on what we're doing about this. Firstly, we still have a very strong IoT platform to capture growth. We've created a very strong integrated cost-competitive business, leveraging on U.S. shale gas, with strong customer intimacy, innovation focused on our customer success and increasing the range of sustainable offerings. We've demonstrated we have the organic capacity to capture market upsides. We're working on a number of short-term and longer-term value improvement initiatives aimed at conservative cash, improving working capital cycle, delaying discretionary spend until the markets recover. However, we continue to focus resources on Olympus transformation, synergies, innovation, digital improvements to unlock sustainable latent value as part of a business transformation process. We're committed to delivering the Oxiteno synergies of $100 million by 2025. The integration is proceeding to plan. We're implementing operations in where 1 region supports the other, for example, sending ethanolamines to the U.S. when there's been an outage. Also, we're increasing our local presence with some specialty molecules that are produced outside of South America and in Europe and North America. And additionally, we're looking to optimize our presence in PO derivatives in South America, given our upstream integration and conducting network optimization across the whole North American footprint. We continue to focus on innovation and sustainability to offer products and developing a competitive advantage to IOD's downstream business, which is key to bring long-term value to the company. If you look at this business a few years ago, the vitality index, which is the contribution margin from new products, was about 10%. Today, we're running around 16% backed by world-class global innovation centers invested in the U.S., Brazil, India, Australia and China. We use this core bench strength of products and technical and application know-how to bring these effects across a broad array of attractive markets and global and local brand-centered customers seeking a broad range of solutions. Our sustainability commitment consists of 3 objectives: decarbonization and promoting eco efficiency in our operations; developing more innovative and sustainable products; and ensuring our organization is ready for the future. Each of these objectives is supported by a robust innovation plan. So I'll hand over to Chris.

Thank you, Alastair, and to D.K. I'm very pleased to announce that fiber has achieved EBITDA of $48 million in the past quarter. This represents growth of 140% from previous quarter, though we do recognize a 32% decline year-on-year. Importantly, our volumes have shown encouraging signs, increasing by 10% quarter-on-quarter and 6% year-on-year, signifying a robust demand. We touch on the 3 businesses. Firstly, our Lifestyle fibers was supported by volume growth, primarily in India and Indonesia as D.K. referred to, despite the ongoing margin pressures that we do face from Chinese competition. Nevertheless, the uptick in volume is a promising indicator of the beginning of recovery in the polyester value chain. Additionally, the introduction of the BIS policy in India is anticipated to bolster polyester in the subsequent quarters. And at this moment, the Indonesian government has initiated an investigation into textile import product as an initial step to safeguard that domestic industry where we obviously have a strong position. Moving to mobility favors, well, the OEM car and airbag sales increased. Replacement tires demand was softer than expected, which had an impact on our overall volumes. However, I think it's important to acknowledge the recovery of the automotive industry. We're optimistic that our volumes are likely to grow proportionately. It's also worth noting that mobility performance was supported by resilient margins, cost reductions and the onetime insurance income of $11.4 million. Now turning to hygiene. It's certainly no secret that we have faced challenges, particularly in Europe. Inflationary pressures, weaker demand, and also, if we include Russia, the lower utilization of that facility has had an adverse effect. That said, the vertical is benefiting from polypropylene price decline, which has yielded a positive lag impact this quarter. Looking ahead, we'll be ramping up operations in India and aligning with our strategic focus on capturing growth in such an emerging market. Now I'd like to take the opportunity to discuss the -- what we see as significant strides we've made with our footprint optimization, a key pillar of our strategic restructuring efforts. If you remember, at the beginning of this year, we embarked on a journey of transformation aimed at reshaping our manufacturing footprint, particularly but not solely in Europe, and our goal was clear: strengthen our core polyester based fibers portfolio; address underperforming sites; and to shift our resources towards higher-performing locations, indeed lower cost locations. Our approach has been characterized by razor-sharp focus by the management team in 3 critical areas: It's cost cutting, it's plant optimization; and leveraging our global footprint. And I am pleased to report that we are firmly on track. Since the initiation of this program, which we began in quarter 4 last year, we've achieved significant reduction in our European headcount, reducing by 400, with a further 200 planned by the end of '24. I want to emphasize that this downsizing has been so far without a complete shutdown of any site. Furthermore, the transfer of particularly lifestyle production from Europe to Asia is proceeding as scheduled, with the completion expected to be occurring in H1 2024. This move is a testament to our commitment to adapt and thrive in a changing global marketplace. In our European operations, we've taken robust measures to streamline by mothballing noncompetitive assets and certainly maximizing synergies across entities. Our strict management protocols, cash management protocols to be specific, has been focused on capital expenditure and working capital reduction, and are set to safeguard our positive cash flow. We're progressing ahead of plan to deliver on our target of 10% manpower reduction in the EU, and that translates to $25 million fixed cost reduction. In addition, the management has taken decisive actions in '23 to reduce the CapEx allocation and working capital, actions that will improve our cash flow significantly by year-end. And what D.K. will talk to a little bit later is about our Olympus program. Now from a fiber contribution, those -- that program is bringing efficiencies with a sustainable run rate of over $200 million year-end. Finally, in addition to the footprint optimization program, our Fibers segment is also undergoing an organization reshaping, aiming to drive performance improvement through 2 pivotal initiatives. Firstly, we're transitioning to a segment-centric organization. This shift will create a leaner, more agile structure, which is crucial in today's fast-paced business environment. It will facilitate quicker decision-making and foster enhanced collaboration across the segment. And as a part of this transition, we are building in a strategic and commercial excellence into the segment management team. We're also establishing a segment-specific transformation team to accelerate our strategy and particularly in the areas of digital and footprint optimization. Secondly, we're establishing 4 operational priorities, which D.K. referred to in his opening, which has a heightened emphasis on EBITDA and cash flow enhancement. Each of these priorities will be led by a dedicated resource backed by the support of a cross-functional team. This new approach will ensure the right mix of skills and perspectives are brought to the table in an accelerated time scale. To guarantee a disciplined and structured approach, we've also decided to employ a high-level lean management and Six Sigma experts for each of those priorities. And just a few words on those 4 priorities. Firstly, realizing COMA improvement specifically by driving pricing competencies and portfolio actions as well as raw material options to drive cost improvements. Secondly, achieve a further reduction in fixed costs. The results to date in Europe footprint work gives us reason to believe and the confidence that there is more to be had, and that includes in the Americas. Thirdly, raising our operating rate, which will, in turn, in some cases, require rightsizing some units. And finally, streamlining our working capital. Inventory management is a key and particularly establishing a very strict cadence and protocol of SKU optimization. We are confident that these changes will bring about positive impact on our operations and financial performance, and we look forward to bringing you further details of these initiatives to be shared at the next Capital Markets Day. Thank you. And I think I hand it over to D.K.

Thanks, Chris. So let's cover the Olympus program. Through our relentless pursuit and efficiency improvement, we have delivered run rate efficiency gain of $502 million on date. As we approach the program conclusion in '23, as I mentioned, we are gearing up to introduce Olympus 2.0 in our next Capital Market Day. The next phase is projected to unlock additional saving of $500 million, leveraging on the new SAP backbone, digital programs in direct procurement and the work done from Olympus 1.0. In our Olympus 2.0, our main focus revolves around people's transformation through digital and business system. This means developing internal capabilities, attracting talent and fostering knowledge across our diverse businesses. Our strategy involving advancing S4 HANA adoption by transitioning from outsourcing to establishing an in-house center of excellence. Additionally, we are investing in tools and technologies to sustain our competitiveness, including digitalization of procurement, as I mentioned, implementing predictive maintenance and deploying analytics for manufacturing, among other initiatives. It is essential to mention that Olympus 2.0 is still in the early stage, and we're looking forward to delving into more specifics at our Capital Market Day in next year. Next slide. So in response to the current challenging environment, I think cash is the king. We have taken aggressive steps to rationalize working capital and remain committed to achieving our cash conservation goal of $500 million in '23. In 9 months '23, we have conserved $450 million cash, which represents 92% of our full year cash conservation target, and this is attributed to the following 2 steps. First, successful rationalization of gross working capital by 13 days with operational improvement leading to cash conversion of -- for $248 million. Second, reduction in CapEx by $210 million, with the optimization of our maintenance CapEx for $140 million and reducing the growth CapEx by $70 million. Looking ahead in 2024, our focus on conserving more cash via cash optimization remains steadfast. The temporary pause of the Corpus Christi project exemplifies management's proactive approach to CapEx optimization and challenging conditions. Corpus Christi project will postponed scheduled growth CapEx of '24 and '25 to later years once we decide to restart. All these management actions have led to conserve more cash and create free cash flow in this challenging macroeconomic conditions. Company has used the free cash flow to reduce the net debt. In October '23, Thai Rating Agency, as I mentioned, has reaffirmed our rating to A- with a stable outlook, reflecting confidence on our financials and business profile. Underlying strong fundamentals and benefit derived from our global footprint enable us to maintain strong operating cash flow, which can be seen on the left-hand bar chart. In last 12 months, the company has generated an operating cash flow of $1.6 billion in these difficult conditions. The cash conversion ratio is 155% in the last 12 months, which showcases management's relentless focus on cash conversion as explained earlier. How this operating cash flow was used? It funded maintenance and growth CapEx of $808 million, interest cost and perpetual coupon of $396 million, dividend to shareholders for $232 million, displaying our commitment to shareholder despite turbulent market, thereby generating a free cash flow of $160 million. On top of this, as you might see that we keep increasing our liquidity. We have substantial liquidity of $2.5 billion in the form of cash and cash under management, plus unutilized banking lines, positioning our company strongly for any unforeseen circumstances. The liquidity increase with increase in unutilized new credit lines as we borrowed long term and paid up the short-term loans. Next slide. As you can see, we have a natural hedge on ForEx with our global manufacturing footprint in 35 countries. Our debt and net assets are directionally in the same currency, providing us a natural hedge. We have increased some thai baht debt with lower interest costs, and therefore, long-term investments. In the beginning of 2023, we had a repayment obligation of $1.2 billion for '23, and we have issued tie thai baht bonds of $285 million and raised new term loans of $500 million. This also includes sustainability-linked funding. With this issuance, our sustainability-linked financing proportion increased to 34% of gross debt, which was 20% in 2022, showing our commitment towards sustainability. We had earlier around $1.5 billion repayment for 2024, as you can see now, it has dropped to $1.2 billion, which we already partially refinanced by showing sustainability-linked loan of $290 million in third quarter '23. Our repayment for '24 now stands at $1.2 billion, out of this $450 million will be by debentures refinance in the normal case and rest from term loans for which we already have term sheets. For debentures, we plan to issue new debentures next year as we normally issue THB 10 billion to THB 15 billion war debentures. For term loans, as I mentioned, we already have the term sheets and which are negotiated. We created a free cash flow of $52 million in 9 months and reduce debt, as well as our liquidity is $2.5 billion in third quarter. With the rise in benchmark rates, our finance costs went up to $106 million in third quarter '23. In 2024, the interest costs are expected to remain in the range of $440 million to $460 million. Management is actively reviewing working capital optimization and curbing discretionary spending to lower the net debt as you saw in our cash conservation plan. Today, we maintain average net debt to equity at around 1x across cycles. However, in third quarter '23, it was 1.20x after Oxiteno acquisition in '22. Now we are focused on deleveraging and expect net debt equity to improve with our free cash flows. Now this is just a broader outlook. We expect some easing of inflationary pressure, however, no meaningful recovery in the economic environment in the final months of the year. As you know, fourth quarter is seasonally weak as macroeconomic volatilities remains. Looking into 2024, management expects improvement in volumes as destocking eases across all segments and a modest market recovery with improved margin. We believe the gasoline demand, which has hurt us in the Western markets because of the feedstock, will begin to stabilize going forward as post-COVID activity normalizes. Coupled with the global balancing of refinery production, the regional MX price disparity will narrow, adding our Western polyester business. With China's recent stimulus action, we foresee improved product demand and thus improve operating rate. Given the upheaval in the trade flows over the recent years, we are beginning to see a trend of deglobalization in favor of regionalization as countries increasingly protect their domestic market, we expect a rise in trade and nontrade barriers. The European Union, as I just mentioned, is currently at final stage of approving the ADD measures, and we have these results by November '23. Similarly, Mexico and Brazil recently announced duties and imports. As Chris covered in India, BIS policy polyester fiber PTA has already been implemented and PET will get implemented by May or June. The negative impact from energy hedging, and this year was approximately $95 million, which is expected to normalize in '24. So when you look at '23 results, we can normalize that. IVL's earnings recovery will become from a determined cost push and bringing forward our asset optimization efforts will stringently review our capital allocation to conserve cash and lower our financing costs. These actions, combined with above factors, will contribute to improved performance in '24. So thank you very much for listening, and now we can take your Q&A. Thank you.

[Operator Instructions] So I can see CLSA [indiscernible], you have the first question.

I have 4 questions. Let me first start with the operating rate in China because at the beginning, we talked about 25% of the PET capacity shutdown in China. So before they shut down, how much are they operating? And also relating to this would be the antidumping duty that Europe is going to impose against Chinese producers. Would that mean they will -- because they will be exporting -- they would not be able to export to Europe. And would that be adding more pressure in Asia? Would -- I mean, the supply will be increase in Asia? That is my first question. Second one is on the energy hedging position for '24 because we -- I think we booked loss almost USD 100 million -- I mean, for '23. So what is our position now for '24? And Third question is on the industry landscape because we are now -- I wonder where we are in the cycle because, this year, we had about 4 million tons new capacity and next year, we have another 3. And relating to this question would be on the Corpus Christi project that we paused the construction indefinitely, my question is how much have we put into this project? And why are we pausing it indefinitely because the construction is going to take 2 -- I mean, 1 to 2 years to complete. And by that time, we should see the margin -- I mean, the less supply addition, and we should be able to capture when the market is recovering, but now we decided to pause it. So what exactly is the rationale that we -- are we foreseeing weak margins to stay until '25, '26, or it is something else?

Thanks, [indiscernible] for your question. I'll answer the Corpus Christi question, and D.K. will take the question on the hedging and the Chinese operating rate. The Corpus Christi or U.S.A. and in general, the West Europe and U.S.A. What we need to establish is the raw material situation. If this disparity between Asian raw material, metaxylene in Asia versus metaxylene in Europe and in U.S.A., remains at a wide gap, which we have seen in the last 1.5 year. Then it becomes very difficult for Corpus Christi, in my opinion, to compete against Asian imports. The raw material is much more expressive because Corpus Christi makes PTA and PET. They have to buy paraxylene. Paraxylene comes from metaxylene. And if that disparity between Asia -- and it's not only about China. The reference price is Asia. So that disparity is yet to be confirmed. In our prepared presentation, we mentioned that with the gasoline balancing and the refinery rebalancing in the West. We think the disparity was narrowed down. But if there is a slide on the -- do we have a slide on the disparity? So the slide on disparity will show you historically, as you can see in the bottom '17, '18, '19, '20, '21, there was hardly any disparity between Asia and Europe and U.S.A. But starting '22, the disparity has been very strong. And this eats into the margins of our U.S. operations and our European operations. The benchmark spreads in Asia for PTA and PET, they are cyclical. So that will come back to normalize at historical levels. But if we have to pay more for our raw material in the West, then that impacts the profitability of those sites. So I hope that explains the rationale behind the CCP. And as for the indefinite delay, it's a delay to assess the situation and the cost of completing the project. So I'll ask D.K. to complete all the answers that you -- the questions you asked, please.

So thank you, [indiscernible]. I think your question was one on the operating rate in China. It's about 72%, 73%. First thing, China did build a lot of capacities, and you see that more additional capacity is coming in. But structure of the Chinese industry is that 75% of doesn't have paraxylene integration and 25% is integrated with metaxylene. Your question was because of the antidumping duty, if you can go to the slide of exports of China. So China has been exporting to different countries, but many countries are blocked from China because of antidumping duty, Brazil, Mexico, Japan, all these countries. So they are exporting -- now this is the statistics, which gives you that 4.3 million ton was exported, and Europe was a significant export in '22 and YTD September. So effectively, it will reduce the operating rate there. I mean, they don't have a place to export, but there's already margins are so low today than what the -- they are making negative cash flow. We can show you a negative cash margin slide with Chinese CCF publishers that -- what negative cash flow they create. And that's why this recent 4 million tons. This is the -- published by CCF that what is the PET cash margin in China. And you can see that negative cash flows, which we are making, and which prompted them to cut 4 million ton temporary shutdown of the capacity. So rationalization in China will happen, and you saw some recovery, but it's still far away. So this is how the industry will operate.

D.K., I will add that rationalization will not only be in China. Rationalization will be in a many parts of the world. Because at these low levels of margin, and with the penalty on raw materials, there are lots of companies that are running on negative cash. IVL is running on positive free cash flow as a whole. And not everyone is in that status. So the rationalization is not only in China. Rationalization is going to be across the board until this rebalancing happens. And this is not the first time we have seen high capacity additions in China. It comes in blocks. So this time, we do have a lot of new capacity that's come into the market and still some more to come. That's why when we talk about our business planning for '24, '25, '26, we want to do it on a realistic basis, more with a cautious approach, more targeted towards our free cash flow conservation and to deleverage.

I think Mr. Lohia reminded well, one very recent announcement in Europe is about JBF shutting down the plant of 400,000, temporary shutdown, what they've announced. So yes, rationalization will happen across because of this low margin.

I mean, that's not the only one. We have seen in the U.S. that are being -- a couple of plans that have been rationalized. Two of them in fibers. So when you think of polyester because look at the raw material, it goes both for fibers and PET. So the rationalization happens where you have uncompetitive assets. And IVL, I think in our prepared statements, we have said that in our MD&A, we say it as well. We are taking a very hard look at all our cost base, all our asset base and preparing them for -- remaining in the first quarter and cost position. That's what IVL has been. IVL strength has been. We are in the first quartile cost in the markets that we work in, and we want to maintain that. So this high interest rate economy, the high cost of operations because of the war in Russia-Ukraine, all of that has been a catalyst for the entire industry to shape itself, and IVL is also taking active measures to shape itself to more profitable growth, or more profitable earnings going forward. But the base margins in polyester, in fibers, in IOD, they are cyclical. So they'll come back. But the cost pressures are, I think, going to be lingering. There's been a long destocking that has been going on in the industry. And that surprised me very much that there was so much of inventory buildup in the system across the world. I think when the interest rates are very low, people were being -- and when we had the supply chain disruptions, I think, the entire industries, in most industries, build up a lot of inventory for safety. I just didn't realize that the inventory buildup was so huge that, today, we are running productions at below our sales in volume terms. So what you don't see is that we also have a higher cost because we are running our productions at a lower rate. But still, our inventory levels, I believe, are higher than our historical inventory levels in '17, '18, '19. So we still also have room to further destock ourselves. And I think that is across the industries, therefore, we feel that destocking is not over.

So [indiscernible], the other question was on gas aging. You're right. This year, we will lose roughly $95 million. Up to 9 months, this slide shows you, we lost $78 million. '24, we have hedged 32% in Europe and 24% in U.S.A. And the mark-to-market loss is only $2 million at present. So this will get normalized in '24. What we are seeing green bar and the red bar is the energy cost comparison. So don't get confused with that. But basically, $95 million we lost -- we'll lose this year. And next change mark-to-market is only $2 million.

Sumedh from JPMorgan, please ask your questions.

This is Sumedh from JPMorgan. I have 3 questions. I guess, starting with PET. Considering Indorama has always been a global production leader, we would have expected that the PET business, obviously, is top cost quartile. So just want to understand, I mean, we are running at 70% operating rate. And Aloke just mentioned about the potential destocking. So I just want to understand where this will stabilize. In the past, we have seen 80-plus numbers. So I just want to understand this operating rate better and the profitability on the PET. My second question is on IOD segment, the downstream component. Again, there has been some volume impact in to destocking and also margin pressure. So where do we see this stabilizing? Third quarter was weaker than second quarter. So I just want to understand that better as well. And thirdly, on the fiber business, it was quite good quarter, again, relative to past performance. So I just want to understand how sustainable it is.

Sumedh, what you -- what I was explaining even in the last question was that we don't want to carry inventory. We do want to deleverage. But the destocking was a total surprise to me that the market is not yet strong. I think we'll have to wait for the second quarter, which is our seasonally best quarter next year to understand how the polyester value chain plays out. At the moment, we are still in a low season, and we have not seen any recovery in the third quarter. So at the moment, we don't have a clear guidance on how big the recovery would be. What we have are indicators. Like in China, we believe that the government is putting in more incentives, creating the right atmosphere for the housing market to pick up. When the housing market picks up, that drives a lot of polyester growth. So second quarter next year, I think that will be the time when we'll know clearly how big a recovery we can expect in operating rates in the polyester as a whole, not only PET, PET and Fibers together. The margins that are prevailing now, these are not sustainable. I think that's very clear to everyone. And what D.K. was mentioning that we start seeing rationalization of capacity or reduced operating rates. For us, our operating rate will go up because being the world leader in polyester, I would say, we still have the market. We still have the customers, and we are doing everything, including investing in sustainable efforts to remain attractive to our customers. So I believe that will keep us growing as far as volumes are concerned, Benchmark prices led by Asia, led by China, because of the overcapacity that we have is going to take a bit longer. But if we get the metaxylene disparity corrected next year in the second half, let's say, then we are back to our normalized operating model. Not only back to our normalized operating model, but we probably would be a strengthened company because of all the asset footprint decisions that we are taking right now. Third quarter in that sense has been a very productive quarter. We have explored all our sites to understand which of these sites have a long-term contribution to IVL in terms of our ROCE, in terms of our capital employed, in terms of creating value for our shareholders, or should we [ mothball ] or rationalize some more assets and move some of the production to our lower-cost countries, which are our lowest cost countries that can serve the world. One is Egypt. And did we have a capacity of -- remind me, D.K. 500,000 tons. So from -- and Egypt is good on gas cost, is good on conversion cost, and is short of foreign exchange. So if you do an export business out of Egypt, which we are doing already, what we can do better supply chain management and make sure that the Egyptian supply can replace some high-cost supplies that we have in the West, just as one indicator to you. In terms of IOD. We did a very deep dive. We have not shared with you, and we are not yet ready to share with you our North America versus South America difference. South America for us is Oxiteno. So Oxiteno is what we bought in April 2022. It had '22 earnings, which was beyond our model, our purchase model. So we had the Oxiteno management and Alastair as the CEO of that business take us through what happened in South America. One small difference is that, okay, we expected 5.40 to be the exchange rate for Brazil. We have taken now our new exchange rate at 5, which is more or less a prevailing exchange rate. That will impact some cost. But more than that, what we see is that the [ made to ] products that we make in South America, whether it's PET or whether it's fiber or it's the downstream products of IOD, those are getting imported and putting pressure on margins. So what the team is working on is that, okay, let us strengthen our cost base, let's continue to work with our customers, but also develop products that are differentiated from our peers, products that can't be replaced by imports. And one such thing is like the Braskem announcement that they are working with us to make bio-based ethylene. Now -- so we have to continue to improve our product mix. I think the import pressures are always going to be there, but that's a good catalyst for our businesses to optimize the cost themselves. But we do have also, as Alastair mentioned, organic capacity to continue to fill up. So the synergy benefits between our legacy IOD and Oxiteno, there is still half the synergy benefits yet to be derived. I think it's been 1.5 years. There's been a lot of activities. We had a very clear road map on what the synergies are. We are still confident that we'll do more than what we promised. Though in our MD&A, we say we'll meet our $100 million synergy revenue. But you can rest assure that the IOD segment is one segment, which is our growth segment. I think I've said that since the last 1 year. And I remain convinced that IOD is where we will see a lot of return for our shareholders. And that's a business which has solid peers in the West who we can benchmark with. So it's easier for management to understand, which of the areas that they need to expand on. Maybe on IOD, if Alastair would like to add anything more, and Chris may add on the fiber, please.

Yes. Thank you, Mr. Lohia. So I think the first thing is the management team is absolutely committed and focused to gain margin. Volumes, I don't think we're losing market share anywhere. I think we've protected that to a large extent. I think you've got to look at it in different markets. The home and personal care market is very strong. It's actually stronger in South America this year than it has been historically. And then in North America, it's down about 10% and it's 10% because people are more switching to value brands at the moment with the share of the wallet internally. But that's going to return. You can already see in the U.S. advertising about all of the premium brands coming in, and that's almost a nightly thing. And quite frankly, they work better. So it's one of these false economies where you look at something on the shelf, you think it's a good economy, but in reality, it doesn't work and you use 3 times as much anyway. So all of that's going to come back in due course. I think the biggest impact we've seen is on crop and mainly in South America, to be honest. And that will flow back. Brazil is breaking crop production records. It's working through its inventory. And that is going to come back because it's a necessity of everyday life. It's not going to disappear, and therefore, as soon as the inventory is down far enough, people will start buying again. I think construction, as Mr. Lohia said, very much built on what happens in China, what happens in the U.S. We see new builds going up in the U.S. now because basically people are locked into low mortgage rate contracts from '21, '22 when they got very low interest rates. They're not portable, so people aren't moving houses. So if they want to move a house, they're going to buy a new one, and you can start seeing the new build construction going up. So I think you're going to see some gradual return. I don't think it's -- I think it's going to be very personal to say it's next week. I think we just watch it returning, and we make sure we keep our own market share, and make sure we keep doing the right things and it'll come back.

Just a couple of words on fiber. So firstly, thanks for your interest and recognition. It has been a good quarter relative to where we were in the past. In terms of the outlook, we approach it in 2 ways. One is control the controllables. And that's why we are confident that the footprint optimization, the moving volume to high-performing sites, low-cost sites, that's controllable. And we're doing everything plus more in that regard. In terms of the market. Look, I think there are some additional indicators to what even Mr. Lohia said. Global light vehicle production is normalizing, normalizing to growth. That's good news for us, and we can already see that coming through. The lifestyle business, like everyone here, has really had a challenge in terms of the destocking. But you can see from the global fashion inventory right now, in quarter 3, that's coming to normalizing and into a reorder phase. That's a positive. And I think the third area that gives us confidence is we're playing where we need to play, right? We've got capacity coming online in the growth markets like India, both for Hygiene and Lifestyle. We've got new production with state-of-the-art technology in our North American Hygiene business, which will take us into the premium segment, and enable us to get into incremental business in the medical sectors. So I agree with Alastair. I think there is a reason to be optimistic. I think, in today's world, we've always got to be cautious and prudent in that regard. But the indicators are positive across a number of fronts. So thanks for the question.

Just to add on the operating rate, you mentioned, Sumedh, is that it's a combination of integrated PET. So PET is 82%. PTA is 62% because we have shut down this [ mothball ] -- the PTA plant, and we're doing more -- it's better to buy than make it, and that is the reason. So blended is 71%.

While we're waiting from the floor, we have one question online. So Mayank from Morgan Stanley.

Firstly, thank you for the presentation today. And thank you for focusing on the cash flow side, which was very interesting to hear of what you guys are doing. A couple of questions on that front, if you can just help address that. You talked about the reduction in the investment numbers that you're kind of thinking about for '24 and '25. Can you just talk about how does that translate to in terms of your net debt numbers because right now, it looks like the net debt is still flat quarter-on-quarter at $6.7 billion. So can you just talk about how the net debt progression will look like? So that's one. The second question was more in terms of the destocking cycle, which I think the entire management team talked about. Like how confident are we that we are kind of pretty much at the end of this destocking cycle? If you can just give us some flavor objectively around what you are seeing on the ground that will help us understand that. And I think the third thing was more in terms of the refinancing that you talked about on the debt side, which you're talking about refinancing through bank loans. So how much will be your exposure by end of next year, which will be fixed and floating? If you can just give a rough sense around that, that would be great.

Mayank, Aloke here. D.K. will take the refinancing question. But your first 2 questions on -- let's say, one is on destocking. Now on destocking and how that will lead to deleveraging? I think, clearly, we have looked historically at what our operating leverage was, what our working capital needs were. And we find that we are still 10, 12 days off where we used to be. So that is one area, which is create free cash flow. We have been very particular about looking at where we are spending the cash flow that we generate. Now obviously, our business plans are not yet done for '24, '25, '26. So to know exactly how much will be the deleverage is a lot dependent on how the market recovery we estimate. I think that sort of granularity we'll be able to show you when we meet for the Capital Market Day. But in general, the direct or the understanding of the management team and the operating teams is that preserve cash, do the right things. And in this -- and this year, I think, as an example, is the right example for me that when our earnings have halved, when our EBITDAs have halved, we still have -- and we have created positive cash flow, positive free cash flow after paying dividend. That's happening for me. So I'm confident that in '24, '25, '26, you will continue to have positive free cash flow that will delever. To what extent, will be dependent on our operating rates, will depend on the management actions that we are doing on improving our cost position and how the benchmark margins perform. So please, let's wait for that. Why do we think destocking will come to an end? We have not said when it will come to end. I think it will come to an end. We thought it would come to an end by second quarter of 2023. But obviously, we continue to see that, for instance, in quarter 3, quarter-on-quarter, we had a 1% volume loss, not a huge loss. Quarter 3 is also seasonally a weak quarter. But we are talking weak quarter 3 over a weak quarter 2. So our quarter 2 was not where it should have been. So definitely, it's just that the global economies and the very high cost of interest is forcing everyone to look at their capital employed in a very granular detailed manner. And that is forcing, I think, all the value chain, across the value chain in all our segments, in all our verticals that we all are being very cautious of how much we are carrying. I think even with the war now in Gaza, I don't feel that, that is going to have any lingering impact on the oil price. Since the war on Gaza, on Hamas, we have seen actually the oil pricing contract, which is a good sign. So with the oil prices contracting, that will also reduce capital employed. And with the recessionary sort of conditions prevailing globally, we don't expect a spike in inflation. Inflation is being tamed by the high interest cost. So I also believe that, that is going -- now that is also leading to everyone getting to, more or less, where they need their inventories to be. Where exactly are we in that process? We believe we are very close to that. We may be at the bottom of it. We may be -- D.K. and I argue about that. D.K. wanted to say that destocking is over. And I said, what's the point of saying that until we know it. So let's get a few quarters in with solid growth on volume. Never mind the margins. Margins are cyclical. They'll come back. But let's get the growth in our volumes. Let's get all our management actions in place. And then we can claim that we have destocking over, and we are back on our earnings growth. Was there any other question that I could answer apart from what -- deleveraging the debt? Go ahead.

Mayank, so as Mr. Lohia mentioned that we are very stringent now on the capital allocation. You saw the results, that $210 million, we reduced the CapEx. You can see that next year, we are reducing growth CapEx of nearly $120 million to $150 million. Maintenance CapEx, we are reducing further as we are rationalizing some assets. You can see $350 million. And $150 million is a deferred payment on Oxiteno acquisition. So basically, that's about $620 million and, say, $430 million is interest. And as Ms. Lohia mentioned, current tax will be around $100 million. So depending on how the market recovers, we'll be able to deleverage based on this. But right now, focus is reduce the working capital, conserve CapEx and also good efficiencies in the system. Your other question was on the percentage of the refinancing post '24. Today, we are 59% fixed and 41% floating. Our interest blended is [ 5.15 ]. We are taking a very decision in refinancing to keep floating because I think the interest cuts and the yield curves will change. By end of '24, we will have 50% fixed and 50% floating. As you know, Thai bhat is cheaper. As I mentioned, we are refinancing in Thai bhat, which is cheaper. And probably our benchmark -- the interest cost will remain in the same benchmark interest rate. So that's also a focus at how do we keep the interest cost low. Hopefully, that answered your interest...

I think I would like to add. So there is one slide in the deck, which could be misleading, where we are showing you interest costs in '24 and '25. And I don't know how D.K. can model that because he doesn't know his earnings for '24 and '25 as yet. So I will take that with a pinch of salt. And I would be forcing -- working with my teams to make sure it goes below $100 per quarter, not -- $100 million. So I don't know whether that slide about that number, but I mean -- sorry, internal matter.

I think just a follow-up, I think, to what you said in terms of -- let's talk about, I think, 2025, if we can kind of talk about that a bit more because everybody knows where the cycle could be, et cetera. But in your mind, when you look at it from where IVL's net debt would be in the more medium term now versus what you -- over the last decade, what has happened, how do you think about that in terms of leverage ratios for IVL now for the next 5 years?

Mayank, and I think this should be interesting for everyone on the call. We have added a [ para ] in the MD&A talking about strategic options. Now we would be ready to discuss those strategic options in the Capital Market Day. But if you don't take me to quote, I'm going to reduce my net debt to half in the next 3 years. And that's pretty aggressive from $7 billion to $3.5 billion. How I will do it, and this will not be through any capital raise or dilution of the current shareholders. So we have some fantastic businesses, which may have a better yield with our partners. So we have identified all our businesses. What we have -- we have not wasted this crisis, as we said in the last press release. We have worked for these last 12 months looking at all our options, understanding each of our business. We have certain weak businesses. We are fixing them. We have some great businesses. We are finding that are they core to us? Can we generate the maximum value for them? Or can we find a better opportunity for those businesses, which, for IVL, creates cash, creates earnings because these businesses are lying in our books at historical values, but the market value for those businesses are much more. So directionally, that is where -- you said 5 years. I'm being even a bit bolder by saying in 3 years, I'll bring it to half.

So on the floor, do you have more questions, you can ask them now. We don't have any questions online at this time. Okay. Yes. Macquarie, yes, Kaushal?

Kaushal. Just 2 questions from my end. One of the things you mentioned was the management is looking at the different assets across its portfolio, the best -- how to best optimize. And in the past, we've always heard about fiber optimization. And now we're also hearing about PET. So just 2 questions. One is, how long do you see this optimization sort of take? And what are some of the risks in terms of other impairment risk to some of these assets in the West, given some of these overhangs that we're seeing that may be more longer in nature?

Yes. So the fiber portfolio has been something that has been a work in progress for more than a year. So even then, we had the best years in PET and IOD. Fiber was still trailing. So that got the first attention. And in Fibers, we know exactly which are the assets that needs to be optimized. Plus, we have also looked at it from an organizational point of view and centralize the management instead of going vertical management, silo management, very slow response to market needs. We have now centralized that all in Bangkok. We have a new -- how do we call Diego?

Chief Operating Officer.

Chief Operating Officer, centralizing the business under him. And that has just been done. And we spent a good amount of time working with, what was it, 60-odd colleagues reporting into Diego, not directly, but directly and indirectly. So now we are more confident about where do we stand in the world in our fiber portfolio? What is our competitive advantage? Who are our peers? What are the watch outs, and what we need to do? So that business plan is sort of something I'm comfortable with, and we'll talk about it in the next Capital Market Day. The IOD portfolio, I mentioned earlier. I'm very comfortable with what we have. And despite the very weak 2023 in downstream, but we have seen that across the industry, across the peers. So it gives me confidence that what we are seeing in our portfolio is nothing unusual. We still have good customer connects. And again, it's a cyclical thing. So I don't worry about it, and that still remains the highest growth segment going forward. We are helping the segment stand alone. We are resourcing them adequately so that they can run their business in the West, in the Americas with agility. So we don't become a bottleneck to them. Like the Fibers, I'm centralizing in Bangkok. IOD, I'm stylizing under Houston. I don't want any bottlenecks. I don't want silos. I don't want people falling over each other trying to make decisions. CPET, we have the 3 regional systems. We have deliberated the benefits and the weaknesses of such a system. That also is getting centralized now. So the CPET business is going to get centralized. We are also taken some new management in the specialty PET part of CPET, which has been underperforming. So Mark Portman has joined us, is it 6 months back now? 6 months ago. I'm happy with what he's coming up with. We have also reorganized the specialty PET division. So all I can assure you is that we have had a hard look at every asset of ours. And we recognize which are -- in down cycle market, which are our better assets and which are our weaker assets. The weaker assets, the issue that we don't know is depending on this xylene disparity, because xylene disparity, if the refinery balance doesn't happen rightly, and if it can you go to a refinery and balance the margin. If we don't go back to the historical level of disparity between Asia and the West, then there are certain assets that won't make money. And that's why we put a pause -- in my mind, that's why we put a pause on Corpus Christi. And I believe that's why all the partners agreed. There's a huge investment in Corpus Christi. We have collectively invested $1.6 billion to -- for Far Eastern, Alpek and us, the 3, let's say, prominent international companies in the PET space. We collectively made a decision that this is not the right time to invest another $800 million in that business and then get throttled by a very weak raw material situation. So we need to see in the next 6 months, 12 months. So meanwhile, we are going to throttle those capacities. And if you think some of those capacities won't even make money in better times, then we'll take action on that. Sorry, a long answer.

Thank you, Kaushal. We don't have any questions on line. So audience on the floor, do you have any more questions? Okay. So thank you very much. We can bring this session to an end.

Thank you very much, and I appreciate you coming personally here. Thank you.

Thank you.