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

Good afternoon. Welcome, everyone, and thank you for taking time to join us from Indorama Ventures First Quarter '25 Results Briefing. My name is Vikash Jalan, SVP, Corporate Finance. Joining me today, we have Mr. D.K. Agarwal, Deputy Group CEO; Muthukumar Paramasivam and Kumar Ladha, Co-Leaders for CPET segment; Mr. Sunil Marwah, President for Indovida, our Packaging segment; Alastair M. Port, Executive President for Indovinya; and Diego Boeri, Executive President for Fibers. A quick disclaimer that this 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 businesses, which are based on our analysis and available information at this point in time. With that, I'll now invite Mr. Agarwal to first start the business and financial highlights. After the prepared presentation, we'll open up the floor for Q&A. Over to you, please, Mr. Agarwal.

Very good afternoon. Thank you, Vikash. Now let's go through the first quarter highlights and financials. The first quarter of '25 unfolded against a backdrop of persistent global macroeconomic headwinds, as you are all aware, sluggish GDP growth rate. IMF has just revised to 2.8%. Elevated interest rates and geopolitical uncertainties continue to weigh on industrial activity. Particularly, the petrochemical industry remains under severe pressure from weak downstream demand, global oversupply, compressed industry spread and with energy costs staying elevated, particularly in key Western markets. The quarter also saw a sizable reduction in ocean freight rates due to trade flow changing, reducing import parity and thereby margins across our product lines. The company reported a consolidated revenue of $3.487 billion in first quarter '25, down 3% quarter-on-quarter and 9% year-on-year, reflecting lower production primarily due to planned turnarounds at 2 intermediate chemical sites as well as winter freeze-related disruption in the United States, particularly in the first quarter. The production volume declined 5% quarter-on-quarter and 6% year-on-year to 3.27 million tons. Sales volume fell 4% quarter-on-quarter and 8% year-on-year to 3.24 million tons due to the turnarounds. Inventories remained at similar level quarter-on-quarter with major movements coming from liquidation in intermediate chemicals, offset by inventory buildup primarily in South America in preparation for 2 upcoming regular plant maintenance. This is one in PET and another in a small plant in Brazil in Indovinya. Starting from first quarter '25, we have a normalized weather-related disruption into our adjusted financials and all the prior periods are restated accordingly to reflect the current business performance without weather-related events. So you can get a good feel without -- how the performance is without weather-related events. IVL first quarter adjusted EBITDA was $276 million, adjusting for a $12 million impact from the winter freeze, a soft quarter, down 23% quarter-on-quarter and 30% year-on-year primarily due to very challenging time for CPET segment, while other segments remained resilient. CPET with Intermediate Chemicals business reported an adjusted EBITDA of $126 million, down 43% quarter-on-quarter and 50% year-on-year. This was heavily impacted by the planned turnarounds at Lake Charles cracker and Clear Lake glycol plant. These are taken once in 4 years, further compressed integrated PET and MTBE benchmark spreads, lower ocean freights and higher energy cost. Indovinya, on the other hand, delivered $89 million quarterly growing 10% quarter-on-quarter, 18% year-on-year, supported by better fixed cost efficiencies. Over the years, the volume improved, while quarter-on-quarter performance was supported by improved HVA margin. Fibers saw a robust growth of $47 million, up 43% quarter-on-quarter and 22% year-on-year, supported by higher volume across end markets and higher margins in Hygiene business. From this year, we'll be showcasing Indovida, our Packaging business, as a separate segment. Indovida reported adjusted EBITDA of $21 million in first quarter '25, down 6% quarter-on-quarter and stable year-on-year, marginally impacted by sales mix, while volume remains steady. Having a focus on fixed cost, the overall fixed cost of the company was lower quarter-on-quarter by $5 million and year-on-year by $30 million and predominantly coming from asset optimization and the management actions. Fixed costs benefited from asset optimization quarter-on-quarter by $4 million. So as you can see out of $5million, $4 million came from there and year-on-year by $33 million, and the other management actions. So this $33 million is from asset optimization, which means that we are at $132 million annualized rate. Looking at cash flow, operating cash flow surged to $416 million with EBITDA conversion of 152%, driven by normalization of higher short-term working capital in Q4 necessary to stabilize supply chain following asset optimization action. As you know, our working capital was high at the end of the year. This enabled the company to reduce our net debt by $100 million from December '24 level despite growth and maintenance CapEx of $183 million due to planned turnarounds and other growth projects, reinforcing its balance sheet discipline. Our digital transformation projects are progressing. We have unified about 95% of our data across platforms and regions, laying the groundwork for faster, smarter and more integrated operation. Building on this, we are rolling out AI and digital tools to turn into an actionable insight that supports smarter decision-making across key functions such as supply chain, procurement and working capital management. Next slide. Now if you look at segment-wise, IVL reported first quarter adjusted EBITDA of $276 million, a 30% decrease year-on-year, primarily impacted by lower MTBE and integrated MET -- PET spreads, softer volumes and elevated energy costs. These headwinds were partially offset by fixed cost saving from asset optimization and improved margins in the Fiber segment. On a quarter-on-quarter basis, adjusted EBITDA declined 23%, reflecting weaker performance in combined PET and Indovida, partially offset by Fiber improvements in the Indovinya and Fibers. CPET performance, as you can see, declined during the quarter due to reduced volumes in Intermediate Chemicals from scheduled turnarounds, compressed benchmark spreads, high energy cost and lower ocean freight rates. Lower ocean freight rates reduces our import parity in the Western markets and thus compressing the margins. Indovida performance declined by $2 million from previous quarter, mainly due to lower spreads resulting from unfavorable sales mix. However, the segment maintained overall resilience supported by a favorable outlook that is expected to support improved momentum over the remainder of the year. Indovinya delivered better performance driven by better HVA margins and cost-saving initiatives. Fiber segment reported improved performance, reflecting a strong rebound across all 3 verticals. Lifestyle was supported by cost-saving initiatives. Hygiene improved with 20% quarter-on-quarter volume growth and a better mix, while Mobility saw increased demand, particularly in the tire segments following a seasonally weaker Q4. So that gives you some on segment-wise, which will be separately covered by the other speakers. Looking at the performance now on a regional basis. Adjusted EBITDA declined 30% year-on-year, mainly due to lower MTBE and integrated PET spreads and reduced volume from scheduled turnarounds in Intermediate Chemicals in the Americas. So that is the major driver for reduction in Americas. These were partially offset by stronger margin and cost-saving initiatives in Indovinya. Europe also saw a decline, as you can see, impacted by weaker spreads, lower volumes post-asset optimization and higher energy prices. In contrast, Asia delivered improved performance supported by margin expansion in the Lifestyle Fiber despite poor integrated PET margin. On a quarter-on-quarter basis, if you see, adjusted EBITDA fell 23%, primarily due to weaker integrated PET spreads, lower volumes from planned turnarounds and higher energy prices. In the Americas, performance declined mainly due to planned turnaround in Intermediate Chemical assets, which we talked about, which temporarily affected production and sales volume, compounded by lower ocean freights. However, improved performance in the Fiber segment helped partially mitigate the overall impact. With operations normalized, we expect volume recovery in Q2. In the EMEA, performance was softer as the region faced headwinds from lower integrated PET spreads in Asia, lower ocean freights and thus reducing the import parity and also high energy cost. While market conditions remain challenging, the region maintained its focus on operational efficiency and disciplined cost management to navigate the current environment. In Asia, EBITDA softened, as you can see, from $93 million to $75 million, largely due to the narrowing of integrated PET spreads, which were weakest in years. Although margins came under pressure, the Fibers segment demonstrated resilience, helping to partially offset the overall softness in the region. So that gives you the regional one. Now I hand over to Muthu to cover the combined PET -- Kumar to cover the combined PET.

Thank you, Mr. Agarwal. The combined PET segment posted adjusted EBITDA of $126 million in the first quarter of '25, adjusted for the $6 million impact of the freeze, down 43% quarter-on-quarter and 50% year-on-year. End product PET volumes grew by 2% quarter-on-quarter. However, overall CPET volumes were lower by 5%, primarily due to planned turnarounds. The year-on-year drop was mainly driven by lower MTBE margins and integrated PET benchmark spreads, decline in ocean freight rates, planned turnarounds in IC assets, higher energy costs in Europe and the Americas and the absence of the NDC campaign. Integrated PET, our largest vertical in CPET, delivered adjusted EBITDA of $121 million in the first quarter, down 28% quarter-on-quarter. The decline in adjusted EBITDA was mainly due to larger-than-expected drop in integrated PET margins from $148 a ton in the fourth quarter to $116 in the last quarter. Ocean freight rates and higher energy costs. While end product PET volumes grew 2% quarter-on-quarter, overall IPET volumes were down 4% due to PTA turnarounds, which are now regularized in the second quarter. South America faced volume pressure from imports due to lower freight rates, which is being addressed by -- for recovery in the upcoming quarters through pricing strategy. Intermediate Chemicals reported an EBITDA of $4 million versus $49 million in the last quarter. This was mainly due to planned turnarounds at the Lake Charles cracker and the EO/EG plant in the U.S., leading to an EBITDA loss of about $37 million and also burdened by higher energy costs. Specialty Chemicals posted adjusted EBITDA of $1 million in this quarter -- in the last quarter. The year-on-year decline was primarily in NDC due to higher-than-normal sales volume distribution to a major customer in the first quarter of '24 and also the campaign during the first quarter of '24. On an annual basis, we expect stable performance in NDC. Despite ongoing macro pressures and supply-demand imbalances affecting industry spreads, CPET platform remains resilient with global scale combined with local solutions and the proactive management actions on costs and working capital. Performance is expected to improve in the second quarter, supported by a normalization of turnaround volumes and improvement in industry spreads, primarily driven by reduction in raw material costs and increased demand. While CPET is not immune to the ongoing tariff measures, given the large presence in the U.S. and the local -- for local customer-centric solutions, overall impact is expected to be neutral to positive. And now I hand over to my colleague, Muthu.

Thank you so much, Kumar. [Foreign Language]. Good afternoon, everyone. In this slide, we would like to provide some color on some of the key industry dynamics related to China and also the freight rates. Our overall outlook on China benchmark spreads remains cautious, and we believe it is still below reinvestment levels due to the capacity overhang. Now if you look at this more in detail, after reaching a peak in October of 2024, integrated PET margins started dropping through rest of the fourth quarter and also January and February of this year due to reduced order booking, earlier than usual Chinese New Year and extended shutdowns by downstream players. This was combined with new capacities coming online as well. Subsequently, with the increased downstream activity and order bookings, there has been a continuous increase in operating rate. However, the material recovery that you are seeing in this slide to the left, that happened in April when the tariff announcements led to volatility in crude and raw material cost environment, but with PET having good order bookings and relatively less impact of the tariffs on PET versus the raw materials, product prices fell less than the raw material costs, and this resulted in an increase in the integrated PET spreads. Actually, as we speak, now the integrated PET spreads currently stands at $154 per metric ton, similar to what we saw in October of 2024. However, we are cautious on the sustainability of this improved margins since while the site inventory levels have been coming down in China, we see that the total inventory in the system, this has been continuously increasing. Currently, it is about 2.7 million tons. And some more capacity is also expected to come online during the rest of this quarter. Looking ahead, the pace of new PET capacity additions in China is expected to slow meaningfully. The current build-out cycle actually peaked in 2024 with 4.5 million metric ton, which reduced to less than 2.5 million tons this year, and it will reduce further to 1.5 million tons in 2026. Also, based on the latest announcements in the industry, we are not anticipating any material additions between '26 through '28. Now of course, while this helps to ease the structural overcapacity to a certain level, the overhang continues to be in place. And this was the reason earlier we were indicating about our cautious outlook on spreads. Now looking at the right side of this chart, the important aspect of the freight rates, which plays a major role in our business, while our CPET operations are local for local, the margins are tied to import parity, which is greatly influenced by the freight rates. Now you can see here, the freight rates have eased from the highs in 2024 due to the addition of new shipping capacities, also normalization of supply chain disruptions and the tariff-related impact on global trade flows. With the ongoing geopolitical risks and continuing tariff impact, any near-term recovery in freight rates, we believe it is unlikely. Thank you. With that, I hand over to Sunil for -- to cover Indovida.

Indovida, our newly formed packaging segment reported adjusted EBITDA of $21 million in first quarter '25, down 6% quarter-on-quarter, though stable year-on-year. This is a $2 million decline from quarter 4 and almost same as first quarter '24. Sales volume reached 74,000 tons, growing 6% quarter-on-quarter, holding steady year-on-year. EBITDA remains resilient, supported by a strong performance in key markets, which helped offset negative sales mix, weaker demand in some segments and logistical delays in some other. Although some regions saw volume declines due to operational and market challenges. Seasonal demand is expected to drive growth in coming months. The acquisition of 24.9% stake in EPL is expected to be completed by end of second quarter 2025. This will further strengthen Indovida segment by expanding into adjacent packaging products, opening up opportunities to explore new product innovations and customer solutions. Thank you. I request Alastair to please take over.

Okay. Thanks, Sunil, and good afternoon, everybody. So Indovinya delivered a solid financial performance in quarter 1 of '25 despite ongoing industry challenges and a January freeze that impacted the Gulf Coast operations. Indovinya reported an $89 million in adjusted EBITDA for Q1, adjusting for $5.6 million impact of the freeze in Q1 as well. This reflects a 10% quarter-on-quarter improvement. And quarter-on-quarter volumes declined due to the seasonality of the South American crop business that I mentioned on the last call and the planned volume mix improvements on the Essentials business and also the freeze event, as I just mentioned. On a year-on-year basis, adjusted EBITDA grew 18%, driven by core volumes increases of 3%, and this is normalized for the Botany plant shutdown. And in addition, we had some cost base improvements that we're doing through our transformation programs. [ Year ] EBITDA margins improved from 15% to 17% on an HVA products basis and from 12% to 14% on a combined basis. In addition, in quarter 1, we completed our acquisition of the KEMELIX and FLOWSOLVE brands and technologies for demulsifying, dewaxing and flow assurance products from Cargill by Industrial U.K. We believe these products will enable us to continue to grow our Energy & Resources end markets globally and in particular, in the North America as drilling tailwinds take root. Finally, the closure of our Australian Botany Bay plant was completed in 2024 and targeted fixed cost savings achieved. Indovinya continues to serve its customers in APAC through a trading model from its global network of sites, including India. Our strategy remains focused on driving sales growth, innovation, expanding market presence, whilst internal transformation initiatives continue to unlock value. This disciplined approach reinforces our foundation for sustainable growth and long-term success. As we move to end markets, Indovinya's portfolio is primarily driven by our HVA specialty products, which make up 78% of our net revenue and 96% of our adjusted EBITDA, with an EBITDA margin of 17% and strong growth potential, all linked to customer trends. Our Essentials business, which accounts for the remaining 22% of net revenue, is closely integrated with the production of these HVAs, creating operational synergies. The Essentials portfolio follows a commodity-like cycle and should continue to gradually improve as the cycle rebounds. Over the last couple of months, we've been implementing a global innovation in marketing structure focused on supporting our commercial teams and accelerating the identification and capture of new opportunities in our end markets. So as we turn our attention to Home & Personal Care, the demand here remains resilient, although the buying behaviors are being monitored as we move through this period of economic uncertainty and consumers are considering all spending. We continue to make good progress on diversifying our customer base. Turning to Crop Solutions. As we've been talking about in the last couple of quarters, we're at the end of the previously discussed destocking trend. And our Indovinya segment is recognized for its competitive local positioning and particularly facilitating last-minute purchasing decisions. And when combined with a very low supply chain stock levels for the industry, really contributed to an increase in our market share in 2024. Energy & Resources, we experienced a very volatile environment for crude prices in Q1, combined with the recent resumption of operations by key competitors following a force majeure event. Volumes remain constant despite freeze impacts. However, we saw a reduction in prices and margins to maintain our market share. And finally, in the Coatings and Construction, economic inflation and interest rate uncertainty continues to weigh on the coatings and construction end markets. However, we are seeing some green shoots of recovery, combined with potential for increasing our market share and optimizing our product slate mix. Thank you. I'll hand over to Diego.

Thank you, Alastair. The Fibers segment reported adjusted EBITDA of $47 million in the first quarter, marking a 22% increase year-on-year. The growth was primarily driven by recovery margin in Lifestyle and the cost-saving initiative that we have been driving. This improvement was partially offset by higher energy prices and lower volumes in Europe across segments. Quarter-on-quarter, adjusted EBITDA grew 43%, reflecting strong rebound across all the 3 markets, Lifestyle is supported by cost-saving initiative. Hygiene improved on the back of a stronger volume growth of 20% and better mix, while Mobility saw increased demand, particularly in the tire segment over a weaker Q4 due to seasonality. Lifestyle delivered an adjusted EBITDA of $22 million, 38% increase quarter-on-quarter, reflecting consistent improvement, higher operating rates and cost-saving initiatives. The staple fiber and polyester staple fiber industry spreads softened from the previous quarter but remained healthy year-on-year, staying above $150 per ton. Hygiene had a strong quarter with adjusted EBITDA coming in at $ 12 million, an increase of $121 million quarter-on-quarter, driven by better mix and higher volumes. Mobility, which is our tire and airbag business, also saw a rebound with adjusted EBITDA increasing to $13 million, 12% quarter-on-quarter due to a 13% uplift in volume, supported by stronger demand in the tire segment. Management action on fixed cost optimization are yielding results with $12 million year-on-year reduction net of inflation. Looking ahead, we expect the Fibers segment to maintain its recovery momentum, supported by some improvement in demand, volumes from new investment in the U.S. and Mexico, which we'll cover in a minute, along with fixed cost savings from asset optimization and new operating model. This is now an update of the turnaround plan presented by the Fibers management team at the Capital Market Day this year. The plan aims for $125 million EBITDA uplift from 2023 and targets cumulative $228 million of free cash flow generation through reduction in working capital. This plan will reduce our workforce by 1,600 positions with over 650 reduction already implemented by the end of first quarter '25. Our fixed cost reduction target of $74 million was set to be achieved through the implementation of a lean functional operating model, extracting cost synergy from all the acquisitions that formed the Fiber business and carving maintenance expenditure and management layers. This target does not include the reduction from asset rationalization, which I will cover later. The new operating model is implemented in most functions and cadence for the new integrated business planning process is maturing. Network optimization in Lifestyle Europe is on track to be completed by second quarter. In Thailand and Nakhon Pathom, all affected employees of the restructuring program have been let go and saving have been started. As of Q1 '25, we have achieved 62% of the overall fixed cost reduction target of $74 million. As previously communicated, we have planned 4 asset rationalization, 2 in '25 and 2 in '26, '27. In first quarter '25, we prepare for the exit of 2 assets as scheduled. One asset is in advanced stages, and we have received also a nonbinding offer for the other, which is 1 of the 2 targeted divestiture assets. Due diligence is currently being conducted by the prospective buyer. This is expected to uplift EBITDA by $11 million, actually. On investment now, the new Mocksville nonwoven line has been commissioned in the U.S. and trials are currently underway, receiving positive feedback from key branded customer. The line is expected to ramp up by Q3 as planned. Additionally, the 1-piece woven airbag expansion in Mexico is under commissioning and is set to begin commercial production in Q3 '25 as planned. Both these investments will potentially benefit from the Trump reciprocal tariffs and the regulatory framework between U.S., Canada and Mexico. Aligned with IVL 2.0 objectives to generate free cash flow, reducing working capital remains a strategic priority for Fibers. Following substantial reduction of $158 million in 2024, we further decreased working capital by $19 million in first quarter '25. In terms of days, we have achieved a reduction of 255 days at the end of Q1, down from 77 days in 2023, 20 days -- more than 20 days reduction. We have accomplished 74% of our total target of $228 million and are confident in achieving the remaining amount through improved processes and digital tools, such as the full implementation of IBP during 2025. Back to you, D.K.

Thank you, Diego. So looking at the debt side, in first quarter '25, as you know, IVL posted reported EBITDA of $275 million with an additional $161 million of cash inflow from working capital release. And with tax and other outflow of $20 million, the quarter delivered an operating cash flow of $416 million, which is an EBITDA conversion of 152%. Of this $181 million was used for maintenance CapEx, as you know, 2 major turnarounds came in this quarter, and financing costs, including perpetual interest, leaving $236 million in free cash flow for IVL shareholders. $94 million was used in growth CapEx towards recycling project, residual CapEx related to Mocksville site and others. $40 million was noncash exchange and lease impacts, and the quarter saw a net debt reduction of $100 million overall. Management remains focused on generating free cash flow and anticipates growth in '25 and '26, driven by management actions, volume improvement, proceeds from sale of land from rationalized assets, which can be around $200 million to $250 million, planned IPOs and divestitures, leading to net debt reduction in line with the strategic goals. We expect to realize, as I mentioned, about $150 million to $200 million from sale of land and properties of rationalized assets in second half '25 to first half '26 time period. As of March '25, our adjusted net debt-to-equity ratio stood at 1.39x with a DSCR of 1.24x, so solid financial situation. The adjusted net-debt-to-equity calculation excludes not operating debt and the impact of lease liability and noncash exchange rate movement in debt and equity to ensure a more accurate reflection of our financial position by removing noncash accounting adjustment. We continue to maintain a very well-balanced debt structure with 41% fixed and 59% floating, giving us flexibility to manage financing costs as interest rates remain elevated across key markets. With benchmark rates expected to decline, we are well positioned to benefit from lower interest expenses in the future. Our 2025 refinancing plan is on track with a focus on extending our debt maturity and securing lower spreads. We have planned $2 billion of refinancing in '25, primarily to recapitalize Indovinya ahead of its IPO. The term sheet for $1.5 billion long-term loan has been received, and we expect loan documents to be completed by end of June. So this will be on Indovinya balance sheet. The funds will be used to repay outstanding long-term loans and extend repayment profile. We continue to maintain robust liquidity with $2.2 billion available at the end of March '25. This supports our financial flexibility to navigate market conditions and support our strategic initiatives and long-term growth objectives. ESG-linked financing now represents 32% of total debt, reflecting our ongoing commitment to responsible financing, aligned with long-term ESG goals across our operations and capital strategy. Now let's look at the working capital. As you know, the company is focusing on working capital. As mentioned in Q4, we have been actively working on optimizing our working capital. I'm pleased to share that these efforts are showing results. We successfully released $161 million in working capital during the quarter, which supported stronger cash flow and enabled us to reduce net debt by $100 million. Our working capital days stayed at 88 days in first quarter '25. Having said that, we remain committed to maintaining an optimized working capital structure and we'll continue working towards achieving an optimum level with target to reduce our working capital to 78 days on a combined basis, as you can see by '27. So there is a continuous focus on working capital by all the segments. Our CapEx strategy reflects a disciplined approach. We are moderating expansion CapEx with a primary focus on recycling investments. In 2025, we have planned major turnarounds. As you know, this is a year of many turnarounds. First quarter had the cracker and MEG, which occurs every 4 years, and then we have another large turnaround PO/MTBE, which is scheduled once every 5 years. The combined turnaround cost of cracker, MEG and PO/MTBE in 2025 is approximately $200 million, which is shown in this cash outflow. So we remain fully committed on driving sustainable financial strength among -- through continued working capital optimization, enhanced cash flows, deleveraging and disciplined capital allocation. Now what are the key takeaways of this session. Overall, as you can see, first quarter '24 was a soft quarter for our company. The results were significantly impacted by planned turnarounds of our cracker and glycol facilities, weaker integrated PET benchmark spreads. I mean these were the lowest in the history, higher energy prices and lower ocean freights, reflecting the import parity. And ongoing global tariff disruptions have added to volatility, including unpredictable trade policies between major economies, U.S. and China, higher import costs, disrupted supply chain and shifting trade flows, negative impact on competitiveness and sourcing decisions. Looking ahead, CPET performance, as Muthu covered, is expected to improve, supported by normalization of turnaround volumes, increased demand and improvement in the industry spreads, primarily driven by reduced raw material cost and better demand. Fibers is set to deliver sequential improvement driven by volume recovery and management actions. We acknowledge that rising trade uncertainty, particularly around tariff, has reemerged as a key risk in the early 2025. But however, IVL's local-for-local operating model with manufacturing facilities positioned close to major customers across North America, EMEA, South America and Asia provides a buffer against such external shocks. So we are in a much different position than the other peers. The majority of our products are consumed within the same country where they are produced, significantly limiting cross-border exposure. We are closely monitoring market developments and remain committed to working alongside our customers and suppliers to stay agile, reinforce supply chain resilience and strengthen the competitiveness of our value chain. 2025 marks a continuation of IVL's transformation under IVL 2.0. Building on the progress and decisive actions taken in '24, we are moving forward with a stronger alignment, sharper strategic focus and greater discipline to navigate today's evolving global environment. Alongside executing IVL 2.0, we are preparing for our next phase of growth. Management is shaping long-term plans around 3 key priorities, as we mentioned in Capital Market Day, building strategic partnership, expanding in high-growth regions like India and Africa and staying financially disciplined through deleveraging and focused capital allocation. As we mentioned earlier, the expected completion of 24.9% equity stake in EPL is expected too by end of quarter -- second quarter of '25. I think that wraps up the presentation. Thank you, and now we can take your questions.

Thank you, Mr. Agarwal and all the speakers. So audience, you can raise your hand and ask your question. Okay. While we're waiting for the question from the audience, I got one here on the WhatsApp asking about the impact on IVL business coming from the tariffs.

It's a very, very volatile situation. As you know, the tariffs are changing every day. The Trump's tariffs have shaken up the global trade flows, and we believe the impact of these new measures will lead to a long-term structural shifts in the consumption pattern in the global economy. If you see, there are 3 major macroeconomic impacts so far we are seeing. Disrupted global trade flows have contributed to significant drop in ocean freight rates, as you saw in the slide that how much ocean freights have come down. For IVL, this impact puts pressure on import parity in certain markets and therefore, on the margin. As I mentioned, the GDP growth by MF was revised to 2.8% for global, and that's decreasing consumption. We are beginning to see signs of this through declining crude oil prices. As you can see, crude oil has dropped, creating inventory levels across the chemical sectors. This will also result in inventory losses. We do, however, expect the U.S. shale gas economics to remain advantaged as ethane prices have also reduced. The other trend which you are seeing is weakening of U.S. dollar has led to broad appreciation of emerging market currencies, as you've seen in Thai baht. There will be varying impact across different regions. But with IVL's diversified global footprint and natural hedge policy, we anticipate the net impact of currency to be minimal. As you know, we have a large footprint. We create 50% EBITDA from Americas. In North America, we operate 34 manufacturing sites and benefit from the USMCA framework. This is Canada, Mexico. As I mentioned, this region contributes significant percentage, nearly 52% of our EBITDA and IVL's local-to-local model is well positioned amidst the ongoing volatility. Now let's look at different segments, how the tariff developments are happening. CPET, as you know, we have full integration from shale gas to PET in the U.S., which is we are the only producer, a key advantage, especially in light of current tariff discussion. We expect this cost advantage to continue, supported by lower ethylene and ethane prices. However, as you know, PET itself is exempt from tariff. So PET does not have any extra duties coming in, but you know there are antidumping duties in China, so anyway, PET was not coming. But no extra duties were applicable from Korea and all that, and the lobbying is being done for that. The second major change which has happened is ethylene spread in the United States have come down, as operating rates of crackers have reduced due to tariffs by China on U.S. polyethylene and MEG exports. U.S. is a large exporter of polyethylene and MEG, and China has put duties on it. And that's why the cracker operating rates have gone down and the ethylene crack margins have come down. There are reciprocal duties on paraxylene, PET and IPA. We are increasing our U.S. operating rates as we speak, as we are a local producer of these feedstocks, so that will benefit. As I mentioned, PET is exempt from tariffs, so there is no advantage, but 25% duty that is on aluminum. Now this may shift demand towards PVT in the long term, but this will provide some support, not on a long-term basis, not immediate short term. The another challenge, which is coming is that as oil prices have come down, the raw materials have come down, virgin PET prices have come down due to raw material cost, and that has widened the gap with recycled PET resin. That's what's impacting demand in short term in the recycling business have that challenge. Coming to our packaging business, Indovida, we don't have any presence in North America, but most of these plants serve local-to-local model, and that's why we don't see any impact on those businesses, and we continue to focus on expanding volumes in new geographies. Coming to Indovinya, with manufacturing and sales both in North and South America, we are well positioned to maintain pricing and margins by leveraging our regional footprint. The cross-regional setup helps us to stay competitive amid challenges through the trade dynamics. As you know, South America, we buy based on the European ethylene. With lower crude oil, the ethylene prices will be lower, that will benefit South America. On the Fibers side, as Diego mentioned, hygiene and mobility fibers benefit from our local production in the United States and the support of new tariffs and imported textile. Recent -- our expansion in North America on the non-woven fabric and Mexico for OPW on the -- are timely in the mobility section, allowing us to meet growing domestic demand, and we are seeing some immediate signs where more demand is coming from Mexico. While we don't produce lifestyle fiber in North America and exports from Asia may face pressure due to tariff, we benefit from customers shifting away from China. So it's a China Plus policy. As you know, we are largest polyester producer in Indonesia. Our strong presence in Indonesia and India aligns well with this China Plus One strategy. So very evolving situation. But based on current announcement, we expect a net really neutral impact. As you know, company is highly geographically diversified, product diversified. We serve for the local customer. So right now, we will call it as a neutral to positive. Thank you.

Thank you. Since we are on tariff, so I can see some follow-up questions here on the chat saying thanks for the presentation. I have 2 questions. So do we see any increase in volume from the stocking process ahead of tariff? That's number one. And do we see any more demand on U.S. gas that other countries have come to buy to decrease trade imbalance with the U.S.?

Good question. So we did see in pretariff some shipments going across to the United States. As you know, tariffs are applicable for shipments made after 9th April. So naturally, there were a lot of shipments happened. But as we see April to June, in PET, we are still seeing very strong demand, which Muthu covered. We saw some improvement in the margins. The second question was whether -- but as you can see, the impact is on the ocean freight because trade is shrinking. The crude oil prices have come down, the operating cost of the vessels have come down, which is impacting our import parity. Trade deficit, as you know, U.S. is discussing with all the countries. U.S. has abundant gas available. We see this gas and oil trade moving. Of course, it will depend on how the things develop. We have seen correction in the gas prices actually in the second quarter. First quarter, we had a higher energy impact of $16 million because of gas prices, but we see second quarter coming down. But certainly, we see that there will be more exports from U.S. of LNG, LPG and the oil. So that may be to trade deficit. Now this is all negotiations which are going to happen. But it's only going to change the trade flows, not the demand side.

Mayank from Morgan Stanley, can you ask your question?

Yes. I think I had a question. I suppose this is one question, but if everybody individually on the stage can help answer a bit more detailed on this on the demand side, that would be helpful. I think Muthu covered partly on it on the PET side. But can you give us a bit of a sense of what's going on right now in terms of demand data points that you're seeing for the month of May? And how you think about contracting for the rest of the year in individual businesses, where are the pain points, where you are seeing upside, where you are seeing people not responding to anything. So anything around that subjectively or even in terms of numbers would be really useful.

So Muthu, why don't you take, then Alastair can take and then Diego, yes? Go ahead.

Thank you, Mayank. Thanks for the question. As we covered earlier, just before the tariffs kicked in, there was inventory build happening, but that was not based on underlying demand, right? That was more stocking. But we also saw that U.S. -- when the USMCA, that was exempted from the tariffs. So there was some inventory build happening from Mexico and to a certain extent from Canada, which subsequently did not attract duties. If you look at China exports, it peaked in December, more than 600,000 tonnes of exports happened for 2 reasons. One is because the prices were coming down, but also to beat the tariff and before the Chinese New Year, all these together increased the exports quite a bit. Subsequently, they started dropping. Now we see that in March, the exports from China has once again going to 600,000 tonnes. And we hear from market sources that it's going to actually increase to 650,000 tonnes. Because one of the things that is happening is the PET prices -- with the drop in crude, the PET prices have become quite competitive. So there is an interest in buy as well from several markets and several customers at current levels. Now if you look at demand at the retail level, we do not see any major upside or any large impact as well. So what is happening is more at the converter level, some destocking happening earlier and then now some interest coming with the change in prices. And this applies to many of the markets that CPET serves.

Yes, it's a great question, and it's got many, many different answers for the Indovinya business. I think I would start with Home and Personal Care. I think what we're seeing is volumes not dropping today, but with a cautionary note. When I listen to a lot of our customers speak, what they're talking about is this uncertainty around the economy, it's creating an anxious and pensive consumer behavior at the moment. There's a feeling of prediction of maybe about a 3.6% drop in demand in home care. But we're not seeing that yet. So whether it's going to be a 1-quarter, 2-quarter delay on us or whether it's going to be here and then go again. The major issue on here is if you're running out of money in the month, disposable money, you don't buy, you buy as needed. And therefore, that's got an impact on our -- the Walmarts and the Costcos of the world. So I think it's going to be an interesting one to see. On a counter note, personal care is going up. So people are almost selecting their spend on more personal care products and home care products. So I think that's going to be interesting to play out. So I think we're being cautious, but our forecasts at the moment are increasing volume. So that's an interesting one to watch. I think crop is going to continue to grow. Destocking, as I mentioned in my narrative, has come to an end. People need local production, and they need local production from the industries and suppliers that they trust. And therefore, we're well placed to capture that very, very low supply chain inventory across the whole of the crop solutions. So I think we believe volumes will increase across 2025. When I come to Energy & Resources, and we just heard D.K. talking about an answer around gas. U.S. wants to be an energy hub of the world or wants to increase its energy hub of the world, and it's using that as a negotiating term. So I think gas will increase. I think we're very well placed to take advantage of that. I think the question is it 1 quarter, 2 quarters away, I think our volumes are going to increase, especially since we had the winter freeze in Q1. So I think Q2 is going to be stronger. But I think that's one to watch. And with our new products gaining traction, I think that's potentially going to grow. And then Coatings and Resource -- Coatings and Construction, I think it heavily depends on what's going on with interest rates. We've seen a drop in Europe. We've seen a drop in the U.K. We've seen a status quo in the U.S., and we've seen an increase in interest rates in Brazil. And I think that's going to have a very large bearing on where that whole industry goes. But we think tariffs might actually help that industry, especially with some of the downstream producers on MDI, et cetera. So I think potentially, construction and coatings will start seeing some improvement that we've seen in prior quarters. So that's a good one to watch as well, but great question.

Mayank, this is Diego. I'm trying to break it down to you -- for you by region, by market. In the Americas, we see strong nonwoven business. You saw that the administration has closed some loopholes that was allowing these websites -- market spaces to import with the de minimis rule, a lot of diapers and hygiene products. This has been closed. We have seen our big customer in nonwoven in North America picking up volume. And we also see a growing demand for our fiber assets, always also supporting both nonwoven and some industrial applications. So we see good sign of demand in North America. We see weakness in Europe. The impact on the automotive industry is impacting partly the tire business, the OEM business, but completely the airbag business. So that's a negative impact for us. We see weakness there. And we also see some weakness in the nonwoven fibers in Europe due to a lot of import from China, which are pretty competitive and lower cost. Lifestyle is holding well. We are running our assets in Asia quite full. You saw in the presentation that the spread went down a bit quarter-on-quarter, but we have been able to overall maintain the profitability of the segment by taking care of an unprofitable position we had in Nakhon Pathom, which has improved the overall performance. So we are watching what is going to be the ripple effect of Chinese lifestyle product not being able to go in the U.S. We'll see where this land. But we don't expect a major impact. And the big difference with the past -- with the 2023 situation is that there is not a lot of new capacity. There is no new capacity in the textile, polyester textile coming on stream. So it's a very different situation from 2023. And the Chinese are normally able then to fill the capacity by whatever they lose to the U.S., they are able to place it in Asia. So overall, it's a different picture by region, by segment, with U.S. nonwoven being strong, Europe being weaker and Asia being pretty stable.

Thank you, Diego. And Diego was referring to the polyester staple fiber in his comments. So overall, first quarter, because of the turnarounds. Our sale was 3.25 million tonnes. Our first estimate for the second quarter is expected about 3.5 million tonnes as we speak right now. So you saw the balanced view on the different segments. Hopefully, that answered your question, Mayank.

PET, if you look at, you've seen a good 10% decline in combined PET on volumes, partly because of shutdowns, but partly also, I think if you see your competitor in North America also had a pain in terms of volumes. So like can you just kind of highlight if this kind of recovers through the rest of the year, assuming whatever we know today? And also on Indovinya, I think we did not see much of growth Y-o-Y in terms of volumes at all for the first quarter. So do you think that -- I think considering what Alastair was guiding earlier in terms of individual thing businesses, do you see that kind of 4%, 5% growth yet? Or do you think it will kind of be flattening out for the rest of the year?

I think overall, we are still looking at 3% to 4% growth. It is too early to say for third quarter, fourth quarter, what impact market will have. But as you know, 70% of our products are serving to daily necessities. We think there are positives and negatives as in different markets. And Indovinya, you want to comment, Alastair?

Yes. I think quarter 1 was a little bit of an anomaly with the winter freeze volume impact that we had. I think we're probably in line with the rest of industry for Q1, up on some markets and down in others, but generally in line. Where do we see Q3, Q4 and maybe a slight improvement on 2024, I think one of the concerns is just where the overall GDP is growing, and I know everybody is cutting GDP forecast, et cetera. And I think a little bit remains to be seen. I think we're forecasting an increase in our volumes and our revenue. But there are some headwinds, as we've talked about before, the whole unraveling of the tariffs, the consumer pensive behavior that we're seeing at the moment with the uncertain price increases, the interest rates, what's going to happen with tax, what's going to happen with inflation, what's going to happen with the general economy. So I think those are praying on people's minds, and that's where we've been a little bit cautious. But the market is still, as we said at the Capital Markets Day, it's quite dynamic and it's growing, and we've got some new products coming online, as we mentioned. And I think we're well placed that if the market allows us, we'll capture it. But that general view of 2%, 3% is going to be there.

I can see [indiscernible], can you ask your question?

Yes. I have questions on Indovinya division. You reported a drop in the sales volume, but EBITDA actually increased even adjusted for the freeze. Can you explain in what angle that lead to the improvement in the EBITDA? Is it the margins from any segments like Crop Solutions or exploration?

Yes. Would you like me to refer to Q-on-Q or year-on-year in the answer?

Q-on-Q, please.

Okay. So I think there was a number of factors. We've had some increase in margins and some decrease in margins. So I'll explain that to a little bit of an extent in that the winter freeze, obviously, we had to -- with an outage, we had to buy some material to keep our customers whole. So that decreased some of the margins in some places. That said, we've also reduced some of the volumes in some places and increased the margins by product mix. So it was a very variable story on volume and margins. But Q-on-Q, I would say volume and margin slightly down. Where we did make some quite significant inroads is Q-on-Q fixed costs. We had improvements from the Botany shutdown Q-on-Q that came through as we forecasted and expected that improved it. We had some working capital changes. We built up our working capital for the shutdowns we had in Q2 -- forecasted shutdowns. So that will reverse slightly as we move through Q2. And then we also had fixed cost efficiency improvements, and that certainly helps. So that's why you see more of a gap in the EBITDA margins that we're seeing today versus the volume and revenue margins. So it's very much a fixed cost play this quarter.

Sorry, a follow-up on the questions. You mentioned that product mix change. Can you give us more color on that, please?

Yes. Various products, one was EG in South America. We still sell EG in South America. We've been doing a lot of work to reduce the volume because it's not a high-value product from our point of view. So therefore, reducing that volume increased the margin and the product split there. In other areas, we had to buy for resale because of the winter freeze. So that was an effect, which will reverse obviously in Q2. And I think some of our product splits, we went for more of the high-value margin products. So a slightly lower volume in some of the areas than we would expect. As you heard me say before, a little bit of a decrease in home care and an increase in personal care that's got a slightly higher margin. So those are the effects we saw generally across the portfolio.

Hopefully, that answered your questions. Thank you for the question.

Okay. So this is Kaushal from Macquarie. So he has sent a message asking what's the sensitivity of the crude oil price to either business, have we done any analysis on the impact on our earnings? So that's one. The number two is cost saving target for full year '25 is about $130 million, as mentioned by management. From what I understand, $33 million saving in the first quarter '25. Could you share how this will look like in second quarter and third quarter going forward?

So Kaushal, the crude oil drop or increase is sensitive for us. As you know, although we pass on the cost, so margins don't get impacted. However, our import parity gets changed because when we price the product in the markets, the import parity makes impact. Second, the -- we play between shale gas advantage between the oil and gas. So that advantage, if crude is higher, certainly benefits more when crude oil drops slightly narrows down, although the gas also reacts. The lower raw material prices also, as you can see, creates some demand elasticity. Crude oil also creates some noncash losses because of the inventory. So a $10 a barrel roughly impacts $35 million to $40 million in terms of EBITDA, positive or negative. So the immediate focus as we look at the world development is keep our inventories very tight and minimize the inventory losses. And -- so that you're not exposed. Right now, the commodity exposure is very, very important. The second question is on your fixed cost saving. As you saw, our IVL 2.0 is on quite track, $33 million is predominantly coming from shutdown of the CPET sites in Rotterdam, Poland and Canada -- sorry, Portugal and Canada. And also, as Alastair mentioned, in Botany, which is Australia. We expect this to increase slightly in the quarter as you heard Diego is going to be rationalizing some fiber assets, which will also save some fixed costs. So annualized, we think we will be still in track for $140 million to $150 million saving for the whole year '25. So the fixed cost saving is very, very important. What you see here, fixed cost reduction of 74 what is being reflected. Similarly, segments are also working very hard to reduce their fixed cost and also at the corporate level so that we can beat the inflation. So all the management actions in terms of how to keep fixed costs low, inventories low, working capital low and very disciplined cash approach is what is the target.

Sumedh, thanks for your patience from JPMorgan. Can you ask your question now? Sumedh, if you can hear us, you can unmute and ask your question. Please go ahead.

Sure. Yes. I think I joined late, so maybe I missed if you have answered this before, but just asking this question from my side. Firstly, we have seen that the debt levels have largely remained the same, come down just a little bit, but we have EPL acquisition still due for second quarter. So my question is, to what extent do we expect the deleveraging to happen by this year-end? Should we expect like a substantial drop in the debt levels? Or is it not going to be that much? So that's my first question. And my second question is with respect to your asset reviews, we call that there are still some strategic reviews of the assets being done. Is there any more clarity that you can provide, more assets that you may want to discontinue or sell and if there are any impairments that we should be aware of?

Thank you, Sumedh. Debt in first quarter reduced by $100 million, but you're right that we are going to have $250 million coming cash outflow for EPL. So overall, at the end of the year, we just don't expect a significant reduction. But maybe if timing of a property disposal, $150 million to $200 million money, at least $100 million comes in. So there may be a reduction of $200 million, $300 million. We are not expecting any IPO money or any significant divestment money coming in. So it may be lower, but not significantly lower. In '26, when all the IPOs materializes and further divestment money comes in, that will where it will trigger. On the strategic review of assets, also, I would like to share EPL actually announced yesterday their full year results. I think they're quite encouraging. They have reported a revenue of $496 million, which is 7.6% year-on-year growth. EBITDA of $99 million, which is 17.5% growth and EBITDA margin is about 20%. And they have reported a profit after tax. Here, you're seeing in rupees. So I'm just trying to put in dollar terms, $43 million is net profit, which is 44.6% improvement. So quite -- and ROCE has improved from 14.7% to 18%. The earning per share has gone up from THB 7.88 to THB 11.38. They've announced that Brazil expansion capacity for 40 million meters has been added in Brazil. Current capacity is fully sold out. Now this is based on all the public information we have. And as you can see, the tariff impact, they are also passing on and they're working on the Thailand expansion. On the asset review, yes, we continue to review our asset portfolio in ever-evolving situations. I think in Capital Market Day, we said we are reviewing a couple of assets. Right now, we have not narrowed down on any immediate impairments, but we continue to assess. You heard from Diego that 2 assets are getting divested. We don't see a major impact on the impairment, maybe $5 million to $10 million, but nothing of that where we have reached a conclusive step. As you know, one of the Asia PET assets, we had already impaired in '23. So we don't see immediately any new impairments, but we'll keep you informed as the situation develop.

Thank you, Sumedh. Do you have any follow-up questions?

No, I'm good at the moment.

So since we are on this deleveraging and the cash flow, so I will take a question from the chat box. I'd like to know the progress of listing, the packaging and Indovinya. Any change or delay of the plan due to U.S. tariff? This is [indiscernible] Securities.

Right now, we don't anticipate any delay. We are still targeting '26 first half, both IPOs, continuous work is going on. As you saw, the debt is being put on the balance sheet. So right now, I don't think it has any impact to link to U.S. tariff because, as you know, Indovinya business is all in Americas. So nothing to link with business that tariff -- and packaging also, as you know, you heard that it's a very regional business. We don't have any exports to United States or we don't have any investments in U.S. So we don't see right now any issues on the targeted IPOs, which we are planning.

Thank you. So this is from Krungsri Securities. Why Lifestyle fiber spreads have come down from benchmarks, but the performance has improved in the Q1? And then the second question is that in IPET, integrated PET does not -- we did not see much benefit from the optimization in Q1. So these are the 2 questions.

Yes. So it's a good question. The spread for lifestyle have come down for a number of reasons. We have seen some stock building. And then there is now basically with the block of the shipments or with less shipments from China to U.S., there is more volume that needs to find these homes. So that pushes the prices down. The spread also coming down, prices remain the same, but the melt cost has gone up a bit. but the industry has not yet adjusted the prices because there is less volume to be moved. That's the reason. Our results have improved for fixed cost savings. As I said before, we had taken out a cash losing position and earning losing position, and we have completed that action. And also, there have been some inventory movements that have driven the earnings up. That's the reason.

Yes. So it is a mix of European business, Asia business, and that's why although the benchmark spreads have come lower, but the improvement in the Lifestyle. You want to take integrated PET that why first quarter?

Yes. So first quarter, actually, we did -- there is a $27 million incremental savings. If you remember, the total in CPET is about $93 million out of that after what were in '24, the incremental in first quarter is $27 million. And for the full year of 2025, we are expecting $64 million incremental fixed cost savings. So this is happening as originally planned due to the asset optimization exercise.

So I think just to supplement, first quarter did realize from the rationalization, but there were negative -- many negative things, as you can see, integrated PET spreads, energy costs were very low PET spreads, energy costs were high, and we had the turnaround. So that significantly impacted.

Thank you. I don't see any more hand raised and there are no more questions left. So we would close the meeting now. And thank you very much for joining us today. And if you have any more questions, please do connect with the IR team, and we'll be happy to engage one-on-one if you have any more questions. Thank you.

Thank you.

Thank you.

Thank you very much.

Thank you.