INOVYN Q3 2017 Trading Statement
Q3 2017 Preliminary Trading Statement
INOVYN Limited announces its preliminary trading statement for Q3 2017.
Based on unaudited management information, INOVYN Limited reports that EBITDA for the third quarter of 2017 was €179 million. This represents the second highest quarterly EBITDA performance since INOVYN was formed, and compares to €130 million for the same period last year, and €192 million for the previous quarter. On a last twelve month basis, EBITDA has increased to €604 million, compared to LTM EBITDA at Q2 2017 of €555 million. The strong financial performance is a result of healthy market conditions, underpinned by a synergy programme that is helping to transform the financial performance of the business.
Capital expenditure was €112 million for 2017 year to date, €42 million of which was spent in the third quarter.
The third quarter performance
Total sales volumes were up compared to the same quarter in 2016 due to higher levels of production across many of our sites.
The General Purpose Vinyls business is benefiting from a balanced market, and average prices were higher than the same period last year, although they were lower than the previous quarter. Ethylene contract prices (as reported by IHS) averaged €975 per tonne for the third quarter of 2017 compared to €932 per tonne over the same period last year, and €1,038 per tonne in the second quarter of 2017. Margins over ethylene were lower than the record levels achieved in the previous quarter, but were higher than the third quarter of 2016 since the increase in selling prices more than offset the higher ethylene costs.
Low industry stocks and good demand levels resulted in a €30 per tonne increase in European contract caustic soda prices for the third quarter of 2017, which were €80 per tonne higher than the third quarter of 2016. Sales volumes were higher than the same period last year, but were lower than the previous quarter. Implied European caustic soda demand (reported chlorine production, less reported caustic soda exports, plus the reported caustic soda stock change) was higher than the same period in 2016. Average energy costs remain at relatively low levels, and margins over energy were higher than both the previous quarter and the third quarter of 2016.
Approximately €20 million of synergy and cost savings have been delivered in the third quarter of 2017, and approximately €154 million since the formation of INOVYN. Improvements have been delivered in many areas of the business, from energy initiatives, transport optimisation, fixed cost reductions, production cost efficiencies and other procurement savings.
Net cash flow from operating activities was an inflow of €216 million for the quarter (and €393 million for the year to date), with the strong EBITDA performance being further supplemented by €53 million of inflows on net working capital balances. Offsetting this were €9 million of pension and other provision payments, and tax payments of €6 million.
No amortization or interest was paid on Term Loans A and B in the quarter, with the next scheduled payments falling due on October 2, 2017. The amount of cash and cash equivalents as at September 30, 2017 was €260 million and no amounts had been drawn down against the Group's €300 million Receivable Securitization Facility. Net debt was approximately €788 million at September 30, 2017, compared to €963 million at June 30, 2017 and net debt leverage was approximately 1.3 times.
On October 5, 2017 the Group announced its intention to enter into an amendment to its existing Senior Secured Credit Agreement to:
- decrease the interest rates applicable to all outstanding tranche B term loans due 2024;
- decrease the interest rates applicable to all outstanding tranche A term loans due 2021;
- borrow additional tranche B term loans due 2024 in a principal amount equal to €140 million, the net proceeds of which will be used, together with cash on balance sheet, to redeem, on or after November 15, 2017, all of its €240 million outstanding 6.250% Senior Secured Notes due 2021 at a redemption price equal to 103.125% of the principal amount of the Notes redeemed, plus accrued and unpaid interest