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

Good afternoon, everyone, and thank you for joining us today for Indorama Ventures Second Quarter 2026 Results Briefing. I'm [indiscernible] moderating this call. Leading the presentation today will be Ms. Aradhana Sharma, followed by our segment leaders, Muthu, Sunil, Alastair, Diego, who will lead us through the performance of their respective businesses. [Operator Instructions] Before we begin, please note that this meeting is being recorded, and a replay will be available on our website following the session. Today's presentation includes certain assumptions and forward-looking estimates based on our current industry and business outlook as well as information available to us at this time. Over to you, please, Aradhana.

Thank you, [indiscernible]. Good afternoon, everyone, and thank you for joining us today. Let me start with the key messages for today's earnings call. IVL posted an exceptional Q2 and first half performance driven by 3 primary factors: Firstly, the advantages coming from our structural platform. The company's integrated global platform and local-for-local manufacturing model have enabled the rapid reallocation of production maintain reliable customer supply and allowed for the selective capture of pricing opportunities across multiple geographies during this period of geopolitical volatility. Secondly, management continues to progress on improvement initiatives through operational discipline, including inventory management and a strategic focus on sales and operations execution, rigor to enhance real-time visibility and accountability. And thirdly, favorable market conditions. Geopolitical events led to near-term supply disruptions, which drove higher benchmark spreads across the portfolio, stronger pricing resulted from cost increases in crude oil-related feedstocks. Deleveraging remains on track with stronger cash generation and disciplined operations driving continued balance sheet improvement. Looking ahead, while we expect some earnings moderation in the second half as the temporary market tailwinds begin to normalize, we remain confident in our 2026 outlook and committed to our 2028 ambitions. The second quarter of 2026 marked a meaningful improvement in Indorama Ventures earnings, building on the momentum established in the first quarter. In the first half of the year, consolidated revenue reached THB 245 billion up 4% year-on-year, while EBITDA increased significantly by 61% to THB 29.7 billion. The earnings improvement was broad-based across all 4 segments and major regions supported by favorable industry conditions together with management self-help initiatives. The implementation of SOE rigor directly improved inventory performance. Inventory turnover increased from 4.7x in the fourth quarter of 2025 to 5x in second quarter 2016, representing a structural improvement in converting earnings to cash that is expected to continue. Operating rates were deliberately moderated this year from 76% in the first quarter to 74% in quarter 2. This reflects the conscious management choice to align production with inventory targets, thereby protecting margin quality and cash conversion in a period of volatile pricing. The balance sheet strengthened materially in the first half of 2026. Operating cash flow after maintenance CapEx reached THB 25.9 billion. Net debt was reduced from THB 23 billion to THB 226 billion, and the net debt to equity ratio improved to 1.6x achieving the full year Capital Markets Day target ahead of schedule. Now turning to segment performance. Combined PET leather improvement with an EBITDA of THB 19.9 billion in the first half of the year, rising by 111% year-on-year and quarter 2 was exceptional with an increase of 163% year-on-year, driven by a surge in China integrated PET benchmarks price. CPAP's integrated shale to PEG platform in North America, its global footprint and local-for-local business model remain important structural advantages as market conditions evolve. Indovida reached THB 2 billion in the first half, up 37%, and driven by organic growth initiatives, a full quarter contribution from the new facility in Tanzania as well as disciplined pricing action and the current Middle East conflict. Indovinya delivered a first half 2020 EBITDA of THB 6.4 billion, increasing by 70% year-on-year and a strong second quarter EBITDA up 94% year-on-year. Performance was driven by commercial excellence initiatives and favorable market conditions with improvements coming from both the HBA and Essentials portfolios. The segment benefited from geographically advantaged production in North America and shale gas advantage. Fibers posted THB 2.8 billion in the first half declining by 9% year-on-year, with sequential improvement with quarter 2 EBITDA rising by 39% year-on-year. Stable hygiene demand, portfolio optimization efforts and transformation actions helped to offset market weakness in lifestyle and mobility end markets. On a regional basis, you can see that the earnings improved across all major regions, demonstrating the strength of IVL's diversified global footprint. The Americas remain the largest earnings contributor while Europe and Asia also delivered stronger profitability. The North America portfolio also benefits from shale gas advantage and the overall performance demonstrates how our local-for-local model enables us to respond quickly and capture opportunities during periods of market and supply disruption. Looking specifically at the second quarter, IVL reported EBITDA of THB 21.7 billion, increasing by 129% year-on-year and 169% quarter-on-quarter. The uplift was broad-based across segments and regions, supported by favorable industry tailwinds. Importantly, these market conditions were complemented by management actions and ongoing self-help initiatives including disciplined commercial and operational execution. Again, the Americas portfolio and specifically North America benefited with the structural advantages, including the shale gas linkage for both the CPET and Indovina segments. As we highlighted last quarter, IVL is supported by 4 distinct competitive notes, and our performance in the first half of this year reinforces that these trends are delivering tangible value. Our global local-for-local model provides supply chain resilience and enables us to capture opportunities during market disruptions. Our 4 distinct business engines benefit from a common global platform, leveraging scale, customer access, technical expertise and feedstock integration. And in North America, our shale to PET integration continues to provide a structural cost advantage. Finally, our strength in operating rhythm through S&E improves our ability to align production and inventory with demand, supporting cash generation and deleveraging. We want to reiterate that these 4 modes remain fundamental to our resilience, competitiveness and ability to create long-term value through the cycle. If you recall from the first quarter, we used the slide to explain how the different building blocks of our PET price income together and importantly, the actions we were taking around inventory and SME. And this quarter, we want to come back to that discussion because we have now had another period of significant market volatility, and it provides a good test of whether these actions are working. The comparison with 2022 is particularly relevant. In 2022, crude prices increased very rapidly following the start of the Russian-Ukraine war and then fell sharply in the second half of the year. At that time, we were carrying relatively high inventories with low inventory turnover. As feedstock prices declined, that inventory exposure translated into a significant compression of our realized premium. This time, we have faced another major disruption with crude and feedstock prices, again, moving sharply. There has still been an impact on our premium, but importantly, we have been much more disciplined on inventory deliberately aligning production with demand and inventory targets rather than allowing high-cost inventory to build. At the same time, our focus on SG&A processes creating much tighter coordination across procurement, manufacturing and commercial decisions. This has resulted in operating rates deliberately being moderated from 76% in quarter 1 to 74% in quarter 2. As a result, while there is still some impact from market volatility, we are managing that exposure better and responding more quickly than we could historically. And that's really the takeaway from the slide, S&A and inventory turns are not simply working capital initiatives. There are strategic management tools that help us protect our local for local premium and improve the resilience of our earnings through the cycle. In the previous quarter, we explained how MTBE complements our shale to MEG integration and broadens the margin pool across our U.S. shale to PET platform. This quarter, the key point is how that advantage is behaving in a more volatile market environment. Geopolitical disruption has driven sharper movements in crude in feedstock markets and our integrated North America position has helped cushion part of that cost pressure while preserving differentiated economics across the chain. Looking into the second half, we expect TXMX pricing to remain supportive, which should continue to underpin MTV spreads. At the same time, some of the feedstock advantage is likely to moderate as methanol normalizes and butane cost-wise seasonally into winter. The message for second half of '26 is balanced, and TEP pricing should remain supportive, while the relative feedstock benefit may narrow somewhat. Importantly, the structural value of the platform remains unchanged. Our integrated feedstock position continues to reduce dependence on the conventional naphtha route to support a broader margin pool and strengthen the competitiveness of our North American shale advantage through the cycle. And now I will hand it over to Muthu to take us through the CPET segment.

Thank you so much, Aradhana. Combined PET delivered an exceptional second quarter with EBITDA increasing to THB 14.4 billion, representing increases of 163% year-over-year and 164% quarter-over-quarter, driven by favorable market conditions and supported by management actions. Integrated PET benefited from a significant surge in China integrated PET benchmark spreads which increased from an average of $132 per tonne in second quarter of 25% and 176 per ton in the first quarter of 26 to 279 tons in the second quarter of '26. Following tighter industry operating rates, limited new capacity additions and temporary supply disruptions associated with geopolitical events. PET prices rose through the year from crude oil-related feedstock increases and cost inflation in the segment was muted, benefiting from full value chain integration in North America due to our shale gas linkage. The year-over-year improvement was further supported by lower fixed costs from our rationalization initiatives and management has been prudent on managing inventory levels in the first half of 26 and therefore, deliberately lowering production to align with inventory targets while still ensuring business continuity to our customers through supply chain rigor and leveraging IVL's global network of manufacturing locations and raw material sources. Now talking about individual verticals in the recycling vertical, the ongoing strong focus on management actions in terms of both operational and commercial excellence have shown results with H1 '26 showing a positive EBITDA swing of about $17 million. Talking about Specialty Chemicals, it delivered stronger results during the second quarter, supported by higher margins and stronger volumes across the portfolio. Margins benefited from the NDC campaign run during this quarter. Now intermediate chemicals also improved, supported by stronger U.S. NTB industry spreads which increased from an average of $263 per ton in the second quarter of 25% and 359 per ton in the first quarter of to 587 per tonne in second quarter of 26%, partly offset by lower volumes following the EOEG turnaround during this quarter. So while favorable market conditions were the primary driver of earnings improvement in combined PET, strong commercial execution and the ongoing cost reduction initiatives also supported performance during this quarter. Management continued to strengthen the business fundamentals through enhanced sales and operations execution, better inventory discipline and stronger working capital management, all of which contributed to higher returns and stronger cash conversion. I would also like to take this opportunity to thank all of our customers for their continued support as well as all the super plagues for the commitment, hard work and the diligence they have shown throughout the past several months in mitigating any type of operational interruptions and ensuring business continuity. With that, I will hand it over to my colleague, Sunil.

Thank you, Muthu. Indovida, the Packaging segment of Indorama delivered EBITDA at THB 1.3 billion in quarter 2 '26, increasing both year-on-year and quarter-on-quarter, while still maintaining EBITDA margin at high teens level. The performance was supported by our market-leading position in packaging, also the customer intimacy model that we have built over the years and continued operational improvements. The 62% year-on-year EBITDA increase was primarily driven by strong demand across various markets, particularly in Thailand, Myanmar, Egypt and Ghana. The continued ramp-up in Tanzania following the March 2025 start-up of the greenfield facility there enabled a full quarter contribution, leading to incremental volumes and enhanced EBITDA earnings. EBITDA increased 76% quarter-on-quarter, reflecting strong volume growth across all regions, driven by strengthened heightened demand, domestic demand, which was supported by seasonal uplift due to hot weather and inventory restocking by brand owners amid the Middle East conflict. Higher volume was also driven by organic growth initiatives through new product introductions, line expansions, continued customer wins and additional volumes. Margins improved due to disciplined pricing actions across Asia and African markets on back of the Middle East ward and raw material availability concerns, which were -- we were very well supported by the CPET segment of Indorama. Thank you. I pass it on to Alastair.

Thanks, Sunil. Good afternoon, everyone. Indovinya delivered a strong quarter 2 EBITDA of THB 4.688 billion, increasing 94% year-on-year and 173% quarter-on-quarter. Overall, our EBITDA margins reached 19.4% across the portfolio, while the HVA margin was 21.1%. The strong year-on-year and quarter-on-quarter improvement was driven by both HVA and Essentials, experienced strong performance with our agile pricing and our SOE approach and our ongoing commercial excellence initiatives assisted by the tailwinds of the current supply chain disruptions. With our concentration in the U.S., Brazil and India and 90% of our products sold in consumer-led end markets. We're benefiting from our local, the local and geographically advantaged production linked to strong customer and supplier relationships, remained the key earnings contributor, accounting for 80% of Indovinya's EBITDA. The HVA EBITDA increased 59% year-on-year and 114% quarter-on-quarter, primarily driven by the stronger results in surfactants, ethanolamines and prophy glycol. While Essentials also improved with higher contributions from LAB and solvents. Overall, the quarter reflected a combination of favorable market conditions, strong commercial execution with disciplined pricing and ongoing transformation initiatives supporting the margin expansion and earnings quality. Moving to our market review. The Home and Personal Care markets on margins improved across the regions. In North America, we continue to develop alternatives to grow our business. across both Tier 1 and Tier 2 customers. And in both South America and APAC, we saw margin upside sustained by price increases. On the Crop Solutions, I think the quarter was expected -- as expected before the South American crop season starts. But farmers' profitability and credit concerns still loom across the globe. On Energy & Resources, quarter 2 margins improved as energy prices and demand also improved. On & Coatings and Performance Solutions, the coatings side was as expected. But on the Performance Solutions side, we saw new opportunities for our Jeffco range which were landed in data center growth along with new product launches. Our management teams continue to focus on creating value with our EC squared initiatives, driving earnings higher with our commercial excellence program, managing variable costs through our procurement excellence, reducing our fixed costs where possible and maintaining our peer-leading working capital management ratios. Thank you. I'll pass on to Diego.

Thank you, Alastair, and good afternoon. Fibers delivered sequential earnings improvement during second quarter '26 despite continued weakness across several end markets. EBITA increased to THB 1.873 billion, up 39% year-on-year and 113% quarter-on-quarter, supported by pricing actions, improved product mix and realization of lower cost inventory. While volumes remained below prior year levels, stable aging demand portfolio optimization efforts and transformation actions help mitigate persistent market weakness in lifestyle and mobility. Performance remained mixed across the verticals. The Agile vertical, which is our diaper business continue to provide the resilient earnings supported by stable demand in health care and personal care applications. The U.S. business delivering good performance, while operational improvement lifted profitability in the nonwoven portfolio during the quarter. In the lifestyle vertical, which is our textile business, margins benefited from lower cost inventory carried over from first quarter '26, resulting inventory gains despite broadly flat industry margins. However, earnings remain affected by cautious consumer spending and ongoing customer destocking. Management made delivered production cuts in the quarter in order to avoid inventory buildup, protecting margin quality and cash conversion particularly in India. The mobility vertical, which is our tire business and airbag business remain under structural pressure from weaker automotive demand and excess global tire core capacity, particularly in China. Management continue leveraging its global customer relationships to regain volumes and strengthen pricing. We have limited support from market conditions, management remains focused on initiative within its control. The business continued executing its portfolio optimization and operational discipline. These initiatives are intended to strengthen the business by improving resilience, enhancing cash generation and reduced independence on a broad market recovery. Thank you. Back to you, Aradhana.

SOE is now translating our inventory ambition into measurable execution. At CMD, we identified inventory as a structural opportunity with IVL's turnover materially below global peers and laid out the actions required to improve inventory management through real-time discipline, integrated planning, digital tools and tighter management of slow-moving and safety stocks. We are now starting to see tangible progress. Inventory volume has reduced from 1.5 million tonnes at the end of 2025 to 1.4 million tonnes in the second quarter, while inventory turnover has improved from 4.7x to 5x in the same period. This improvement reflects the increasing discipline being embedded through SMOE giving us better visibility across demand, production and inventory, enabling faster decisions on stock levels and better coordination across our global network. Importantly, this is not simply about reducing inventory. It is about carrying the right inventory at the right places in the right time while maintaining customer service and operational reliability. While we still have further opportunities, the direction is encouraging, we remain focused on structurally improving inventory turnover and releasing working capital supporting stronger cash conversion and our broader deleveraging objectives. Turning to our balance sheet. Deleveraging remains firmly on track. During the first half of the year, we generated approximately $29.7 billion of EBITDA and $25.9 billion of operating cash flow after maintenance CapEx, representing an EBITDA conversion of 87%. This is supported by disciplined working capital management and continued inventory optimization. The strong cash generation allowed us to fully fund our interest cost, dividends and growth investments while still reducing our net debt by THB 9.6 billion. This progress is also clearly reflected in our leverage ratios. Net debt EBITDA declined from 7.6x to 5.3x, while net debt to equity improved from 1.83 to 1.6x, achieving the full year Capital Markets Day target ahead of schedule. Let me close by reiterating the 4 key messages of today. First, this quarter reinforced the value of our structural platform advantages. Our diversified global footprint, integrated value chain and local-for-local operating model enabled us to respond quickly to market and supply disruptions and capture opportunities across our businesses and regions. Secondly, our management self-help actions are gaining traction with disciplined production and sharper not execution, improving inventory control, visibility and accountability. Third, we delivered a broad-based earnings improvement across all segments, supported by favorable market conditions. Deleveraging remains firmly on track. Stronger earnings, disciplined working capital management and continued focus on cash conversion are translating into stronger cash generation and lower net debt. We remain focused on converting earnings into free cash flow and further strengthening the balance sheet. Finally, we reaffirm our 2026 outlook and remain committed to our 2028 ambition. While some of the exceptional industry tailwinds are expected to normalize, the improvements we are making within our control are structural and ongoing. Overall, the first half of 2026 demonstrates the progress we are making under IVL 2.0 and gives us confidence in our direction as we move through the remainder of the year. Thank you.

Okay. I think we can open the floor for questions. [indiscernible]. I think you have the first question.

Yes. [indiscernible]. Can you hear me?

Yes, we can hear you [indiscernible].

Yes. I would like to -- could you add color on the intermediate EBITDA that came in at 96%. How much is that coming from 27 million is the right number. And on NPV USD 50 million the right number and the rest would be pack. I recall that in the fourth quarter, you mentioned that 25 was a pretty tough year for MET in terms of volume DD. Now it's making a lot of progress. And if -- are you seeing MEG margins continue going into July or soften a bit? Or could it be rebound again once the -- now that the thermos blocked again, and on the surface, have you seen leaning at maintaining pricing and margin performance going into the third quarter. Are we seeing a bump only in the third quarter? Or is the structure in the second half of this year?

Aloke, here. So your first question was on MEG. And unfortunately, for us, MTV was outperformer in intermediate chemicals and MEG was not. We have project rebound for our MEG business, which I think -- last year, we said that it is our strategic review. And what we have done this year is that we have taken a very long haul called in the IO clearly facility practically for 3 months to review deeply on what are the equipment-related reliability issues that we need to fix. So the business did very well because within that business is both cracker and the MTBE as well, which both of them performed well during the quarter. So the MEG business itself was not an outperformer during quarter 2. Can you repeat in [indiscernible] were your other points?

In terms of breakdown, I record that you made $90 million of EBITDA from intermediates. Is that most of it coming from MTBE? Because I roughly capula supposed to be over USD 15 million. Another question will be on...

Yes, I don't have that number in front of me. Maybe we'll come back to you with that. But yes, MTB would be the leading number in that, but the cracker margins, as you would have noticed, have also been pretty good in the U.S. because with the crude oil price hike in quarter 2 Fortunately, the ethane price in the U.S. did not spike and therefore, the ethylene crack margins were very good, which has demonstrated both in the IC as well as partly in the Indovina business because in Indovenia, we have 2 crackers for the North American business. Although in South America, we buy our ethylene from the domestic market. So we did not have any benefit in South America, but that we did have in margin benefits in North America in novena. And as we know in North America, the ethylene supplies of all that pipeline to each other. So although our IBO facility, we kept it down, but we could get the revenue benefit from ethylene from the cracker in Louisiana. So the exact split between the 2, I would have to share with you later.

And NPE, normally the third quarter was a bad quarter for over the demand was linked to a cat impact, which is now very strong. Are you seeing that as well?

Yes. So what we are seeing in the third quarter, the July numbers are pretty strong. But what we see in August is that there has been high an export from China of MTBE to Mexico. And Latin America is 1 of our main markets for MT -- so there has been a price decrease for MTBE in August at the moment. But we believe that the gasoline. Because MTBE, as you know, is linked to a gasoline as a gasoline additive and during the second quarter and into July, we also have the, how do you call it, the driving season. So driving season branding benefit that we saw in the second quarter and into July. So -- but again, with this continued impact on crude oil because of the Iran conflict, I think quarter 3 will be all right on the MTBE side. On quarter 4, we would have -- we would face raw material cost increases. So normally for us, the quarter 4 for MTBE would be a weaker period. Quarter 3 would be okay. I mean, at the moment for the last 10 days, it's been weak for MTBE. But I think that may be temporary.

And the last question, just a meals a lot of the active producers have reported like margin double. We're seeing pricing softening going into the third quarter or remain pretty strong because of the supply disruption. You see what is important is that the way we looked at our numbers is that we compare ourselves to 2022. In Feb 2022, we had the Ukraine war. And we saw the same spike of -- if you can put up that graph -- so in second quarter '22, we saw a spike because of the Ukraine wall, which we saw again in we saw again in the second quarter of 2026. But what we also witnessed is that in the past, we were working on SNOP. And because of the we were more concentrating on production and enjoying the high spreads of quarter 1 and quarter 2 in 2022, which left us with a high inventory level when the price decline started. And on that price decline, we had to incur a lot of inventory losses. So on this slide, as you can see, the triangle the picks that we gave up the gains we gave up more than the gains in the ensuing period in the second half of 2022 and the first half of 2023. And what this graph is meant to witness is that -- yes, there was a steep fall in 2022, 2023 from $378 spread for PD to $250 spread. And this is the IVL spread, this is not benchmark. This is benchmark plus IV and which led to a drop of $128 per ton. What this graph is showing is we are not giving the second half number as yet. We don't know it exactly. But we do believe that the second half drop would be less deep, and we would still be in the 200-plus range in the second half. So in some ways, I can give that guidance that the drop this time is going to be less than 20% compared to back in 2022 when we had a nearly 40% drop. So I think we are protecting our core marketing our margins by careful inventory planning, careful production, giving a production losing on unit cost is only $10, $15 compared to losing on inventory, which could lead to hundreds of dollars. Does that answer your question?

Okay. We have hands raised from Mayank.

Okay. Firstly, congratulations on the inventory point, I think everybody on the ODM has focused on it. I think the question really was more about how much more can you go from here in terms of managing working capital? Obviously, you have seen a lot better management, as you kind of highlighted this quarter. Can you kind of talk about how you're thinking for the rest of the year and next year around managing working capital.

Yes, put up Slide 15, please?

Yes, let me put up -- Mayank, we'll put up the inventory terms slide. I think that is 1 that we are emphasizing that. Our inventory terms like we explained earlier, and even at the CMD was that when we looked at our total inventory, it was much higher than what it needed to be in the commodity chemicals. And therefore, we've been looking at that and working on that for some time now. And that has helped in the first half of 2026 and it is still not where we want it to be. So we believe if we can achieve another 1 ton improvement in inventory terms, that will be significant, and that would leave -- that will help both on the slide of the crude oil prices as it happens and as well as releasing working capital and decreasing that. So our target over would be 6x.

Okay. And if I was to kind of break it up in terms of how you are trying to manage this because you obviously are also rationalizing capacity and trying to kind of focus on different parts of the business, fiber obviously has been a challenging one. PET, how are you think about breakup of where you can think about your inventory level setup between fiber and PET, I suppose, is there has been the biggest improvement upside, I suppose, from here on. So when you break it up in terms of rationalizing capacity improving working capital between PET and Fibers, how would you break this onetime improvement going forward?

Yes. So the rationalization of assets have taken place since 2024, and we have rationalized over 3 million tonnes of capacity. Those are already out of the system. So when we look at inventory terms, we use the text book definition, which is revenue and cost of goods sold. So I don't think agent plays any part in this improvement of inventory terms. Inventory turns is purely an outcome of setting target inventories, which in the past, we live on a good and year 2020. And in the golden era, we had margins, Bachat margins of $200. In the last couple of years, we are now trading at a benchmark margin of $100. So there's $100 loss of benchmark margins in PET had to come from EBITDA. But what we are working on is that do we really need to have that much of inventory since we have so many sites in the world, and we are a local for local. And we have our own PTA as well in most of the regions. So therefore, we looked at the entire holistically that what is the level of inventory that we need to carry and serve our customers, the purpose of carrying higher inventories to serve you serve your customers well. And we believe that with a better focus, better weekly or even daily connect between the purchasing between the sales and between the manufacturing, can allow us and with better supply chain management can allow us to continue to delight the customers but at the same time, carry a lower capital employed in the working capital. And this -- in this volatile situation for the last 3, 4 years, especially since COVID. The inventory that sits on you is going to devalue and value because we do believe that peak oil model less is achieved. Electrification is driving businesses going forward. And therefore, ignoring the word the value of crude oil probably is going to end up at $70 and at 70, we don't want to be holding inventory about $90 and then distributing it at $70. So this entire focus on inventory management allows us to in cash as well as to ensure that we don't give up inventory value when the market corrects. The market collection is going to be more on the crude oil front than on the margin front. Because when you look at the total margin across the value chain, especially when you look at North America, you saw the bulk of earnings terms of North America. And in North America, with our sales to PET advantage, both [indiscernible] and PTA, PET and with MTB as a proxy to MX. We find that we can retain the North American business value, but we have to be very, very careful, especially in Europe because we have long lead times from Asia to Europe. And in Europe is where we have our weakest since we shut down 2 of our last sites for PGA in Europe, we are dependent on Asian PTA. And now with the -- let's see also becoming a challenge, we just have to ensure that we don't get stuck with too much of inventory on the seas or at sites. So we would rather take -- be very careful on operating rates and only produce to fair value raw material because raw material in the last 4 months since almost closure has also spiked in terms of not only the benchmark spreads, but there has been a premium to spot availability. And therefore, the management -- the segments are carefully managing that they're only buying spot material where they can pass it on to the customer with the customers confirmation. So I think the whole rigor is around OE sales and operations execution, and that's serving us very well. It is still a new thing at IVL, but I think we made good progress in the first half. And I think second half will see the benefit of that, especially in the sliding market.

And I think the last promise for you was more in terms of the pricing and like considering last quarter was 1 of the best quarters you have had in the industry. How are you thinking about passing on this cost increases. Has that been completely passed through across all the parts of the portfolio in Indovida, the fibers, PET? Or is there some which is still a bit of a lag effect, which you still have to work on?

I think we have passed on every front, as you can see from the results. And as Diego was mentioning, the 1 where we could not pass on the increases is where we took a large operating rate cut was on lifestyle fibers, especially in India. They have a long supply chain, I think, in garments from fibers to garments. And I believe that, that supply chain should be very tight because there was a cautious buying by customers. So we took the view that we would not produce and keep. So we cut our operating rates quite dramatically. And the other 1 would be mobility fiber, I think, especially mobility fiber in China where we have a good presence. That business is -- has been weaker recently. And that has just got to do with the industry. I think replacement tires have not grown. They've actually replacement tires which is the main segment that we cater to in mobility. That business has been very muted. And so that's linked to industries. So I think we are now on indent than our self help. But I think the ones that are going -- that are going to do very well for us from a self-help standpoint is PET for sure, the entire share PET advantage, better scenary performance for European sites. And in Asia, our availability of raw material ability to have local for open advantage. I think all of that will maintain. I'm not sure it's too early for us to say whether the industry spreads for PET, which went down as low as $70 last year, whether the markets next year would go back to $70 in [indiscernible]. I think not. I think the industry cannot work at that level of margin. And I do think it will go up to 100 plus. It's too early for us to -- we don't have enough data points to support that at the moment. So the way I'm looking at -- we have our Capital Markets Day commitment to double EBITDA from that from 2025 to 2028 to $2 billion. And we are on track of that based on our top-down measures that we are looking at. We did a deep bottom-up budgeting last year to get to that number with self-help. We are on track with the self-help part and without relying on margin improvement, our top-down analysis shows that we would get to that $2 billion. We -- as the volatility of this raw material eases away, we have to ramp up our production. Operating rates in second quarter, I believe, was just below 80% for Itai IVL. And that easily, if we can increase that 2 percentage points each year and get to 84%, 85% by 2028. Each percentage point of operating rate increase on our current platform, is for us after coma. I mean, on a coma level, something like $50 million. So a 4% increase means $200 million increase. So basically, we are looking at all fine metrics on where to go. In a commodity business, as a leader, what I'm asking my management is that, guys, why should we not be running let's get our SOE really fully functional and less in a normal time, orator rates. So that's how I believe that -- so we don't double check, I'm saying is we've done a half yearly review. I think most petrochemical company must have done that because times have changed quite rapidly since the last 6 months. And in a deep dive in our '26 second half and '27, '28 delivery, we believe we are on track to deliver on all the metrics that we have for our '28 business plan, which means including getting our net debt to EBITDA to below 3x.

So we have questions related to inventory posted by [indiscernible]. The first question was that, in the CMD management mentioned of inventory of THB 68 billion by the end of 2026. In the second quarter of 2026, inventory was THB 86 billion. Can we expect the inventory to decrease by THB 10 billion to THB 20 billion in the next 2 quarters?

It's all -- like we've been talking today, the price of the inventory -- the absolute price of the inventory is dependent on the price of crude oil. So if the crude oil, which before the conflict was at $70; today, it is at $90. If it goes back to that $70 level, then yes, we will be on target to reach our capital employed on inventory. And if the crude oil prices are higher, as you know from the slide that you saw earlier, the higher the crude oil price, the better IVL enjoy some of the market earnings standpoint. From a self-help point of view or absolute cost -- absolute value of the inventory that we carry, that is determined by the value of the crude oil. So yes, we can get to that level. And I believe since our fourth quarter estimates are based on $70 oil getting, I think we would be close to our inventory target levels. So the answer is yes.

So there's another question following that. [indiscernible] is saying, she understands the current inventory is around 1.4 million tonnes, is asking whether 1.4 million tonnes is sustainable or whether IVL could operate smoothly at a low inventory level, say, 1.2 million tonnes?

Yes. So that's exactly the 5 turns to 6 turns, so that 1 tonne will get us to that 1.2 million tonne level. So we believe it's sustainable. The businesses [indiscernible] at 1.5 million or 1.6 million tonnes in the past. So for them to get that execution quality with better [indiscernible] that's our objective. That's the ambition. And it doesn't mean that we'll be the best operator in the world. I think then we'll become a fair operator. Because what I'm thinking and looking at and learning is that how do the large trading firms operate? Large trading firms through price falls and price increases, they still make money. So what is that magic? What is the secrete sauce to make money when inventories go up and down? So I think we are in the process of exploring that. And I think we are making good progress. So I think we'll maintain that and that is how we'll be able to also deleverage. And the disadvantage of maintaining low inventory is that you won't see the peak earnings that you saw in quarter 2 because then you're giving up upside to protect the downside. And I'm happy to do that.

Okay. [indiscernible] has a follow-up question. It seems that there's a loss on asset reevaluation of THB 849 million. Could you share some color on this?

Yes. Ashok?

Yes. So this is specific to impairments taken in the Fibers business for around THB 430 million. And in the combined PET business for around THB 370 million. So these were -- some of these assets were impaired in the past, and there was deferred timing, which was decided to shut them in 2026. So those actions have been taken. And the purpose of doing this is essentially to improve our quality of earnings. And also, as we reduce our costs, also to improve the free cash flow.

Okay. We have a hand raise from [ Kushal ]. [ Kushal ], would you like to post your question?

[indiscernible] and the management team congrats on a strong quarter and successful deleveraging initiatives. Three questions. I'll ask them one by one. I think just maybe a bit of a follow-up to the previous discussions. Strong uplift in the EBITDA in the second quarter. I just want to understand how much of this was structural self-help which will continue going forward? And how much of this was more because of inventory timing or benchmark spreads which are probably the most cyclical in nature?

What did we do in the second quarter? We started the second quarter when the price of oil was over $100 and we ended the second quarter at a bit below that. So during the quarter, for a short time, it went up -- actually, didn't go up. It remained at $100 or below $100 during the whole quarter. So in my mind, I would have to -- we'll have to give you a more tidy answer from calculations. But I would say that 2/3 of the improvement in earnings has come from self-help and 1/3 of the earnings improvement would have come from inventory gains. And that 1/3 of inventory gains is the one that I do expect that it will go away in the second half, but the 2/3 of the self-help initiatives that will stay with us. . Reflect on Indovinya. Indovinya, we don't get inventory gains or losses. Indovinya is more specialty business. So the Indovinya gains, which is quite remarkable in second quarter, it gained yes from the crack margin. So leaving us at the crack margins, rest of the business just grew because of better availability, better local-for-local availability. And I think the and the work that the management has done in Indovinya that has protected the earnings. The CPET business, we got the improved earnings from MTBE. Again, it's not inventory gain loss. We got the earnings from cracker margins and from MTBE. The MTBE, yes, is linked to the crude oil spike to some extent, but it's a blending component. So what we benefit in the second quarter of MTBE would be the driving season to some extent. So it will be cyclical. It won't be a structural improvement. It will be a cyclical improvement. So Fibers wasn't a great quarter. So overall, there's nothing in there. The Indovida business did extremely well. We also started -- signed up a new plant in Tanzania. So the Indovida packaging business was, I think, a structural improvement. So it leaves us CPET business, the CPET business or the PET business, in which that inventory would have played some role. But remember, we also have firm long-term commitments for our PET. So as much as we gain on the on the rising crude oil prices, some of it, not all of it, some of it is lost to lag effects from fixed price sales. So therefore, when the oil gets back to $70, we would again start gaining on the fixed price deals that we have. And our fixed price deals are longer. So not all of it is inventing again, it's net inventory gain. The area where we have identified looking at our historicals, we have moved to -- from adjusted numbers to reported numbers. And I think that has been a big eyeopener for us in the sense that now we are looking at the earnings, the real earnings, the earnings that will go into our cash flow. And we are trying to explain those numbers rather than without meaning to intentionally putting things under the carpet. But then the adjusted numbers are always looking good enough. So there was less forensics in it. But now on a reported basis, we are putting up a lot more forensics. I do understand that I'm not able to explain to you all the details that you're seeking. But I think think we will gear up better for the next investor call from these questions that you're raising. We'll be able to get you more breakup, more granular data what makes sense for you to have. But I don't want to leave the impression that all of this is inventory gain because it is not. I would say that 1/3 is coming from inventory games. There is some lag losses from fixed price sales and a lot of gain is coming from the way we are operating today.

Sure. And maybe my second question is that I think your utilizations are quite low in the second quarter. And I think part of this is your deliberate strategy to sort of have a very lean sort of inventory levels. Any sort of guidance in the second half of the year in terms of how utilization will look like, especially on Indovinya?

I think Indovinya is earning but I'll let Alastair quote on that.

Yes, sure. So if you think about Q3, it's a very seasonal quarter and typically our highest tonnage quarter. So I think you will see utilizations pretty high. I think across the Q4, obviously, we come to the end of the year, people start destocking, it becomes the seasonal shutdown areas. So you'll see utilizations go down as we control inventory. So I think you'll see the 2 quarters story, very strong in Q3 and then slightly weaker in Q4. But as Mr. Lohia said, most of our plants today are running pretty full albeit their batch plants, so don't measure them like you measure a continuous unit at 95%. You've got to do great changes and create the specialty products.

Right. Okay. And maybe my final question, I think the PET spreads in China are starting to come off. Can you just share some color in terms of what are the current dynamics? And where do we see the spreads landing? Do we see them sort of gone back to precrisis levels or are they structurally higher than those levels? Like how should we think about it?

[indiscernible]