Q4, 2010 Trading Statement
INEOS Group Holdings SA (‘IGH’ or ‘INEOS’) confirms that trading was impacted by a number of exceptional events in the fourth quarter of 2010.
Based on unaudited management information INEOS reports that Historical Cost EBITDA (‘HC EBITDA’) for the fourth quarter of 2010 was €270 million, compared to €294 million for Q4, 2009 and €402 million for Q3, 2010. Refining inventory holding gains amounted to €82 million in the quarter, reflecting the movement in crude oil prices over the period. Combined Replacement Cost EBITDA for Refining and Historical Cost EBITDA for Chemicals (‘RC/HC EBITDA’) was €188 million for the quarter, compared to €267 million for Q4, 2009 and €406 million for Q3, 2010. For the full year 2010 RC/HC EBITDA was €1,564 million compared to €985 million for 2009. The Group now uses RC/HC EBITDA to measure its compliance with the financial covenants under its senior banking facility.
The Group’s performance in the fourth quarter of 2010 has been impacted by a number of exceptional events. The strike action in the port of Marseilles in France had a knock on effect on the operations of our Lavera site, which resulted in lost EBITDA of approximately €36 million (mainly in Refining and O&P Europe). In addition the lightening strike at the Chocolate Bayou site in Texas in November had a significant impact on the operations of O&P North America, resulting in lost EBITDA of approximately €51 million. Lastly, the extreme weather conditions in Scotland in the period have also had an adverse impact on the operations in Grangemouth, resulting in lost EBITDA of approximately €28 million.
Chemical Intermediates reported HC EBITDA of €186 million compared to €144 million in Q4, 2009. Demand for chemical intermediates has continued to be firm and buoyant across all sectors and all regions. The market for acrylonitrile has been very tight with strong fibre demand and high margins have been maintained. There were scheduled turnarounds at Seal Sands and Lima in the quarter. The global market for phenol has remained tight with continued healthy margins. Underlying demand for Oligomers continued to improve in the quarter. The Oxide business continued to benefit from strong demand for its derivative products.
O&P Europe reported HC EBITDA of €5 million compared to €54 million in Q4, 2009. The results for the quarter were impacted by both the strike action at the Port of Marseilles and the severe weather conditions at Grangemouth. The increase in feedstock prices led to a significant squeeze on cracker margins in the latter part of the quarter. Nevertheless demand for olefins in the quarter continued to be strong, particularly in butadiene. Polymer demand remained good across all product types, particularly polypropylene and LDPE, resulting in healthy margins in the quarter.
O&P North America reported HC EBITDA of €33 million compared to €68 million in Q4, 2009. The market has continued to be tight with improving domestic demand and the business has continued to benefit from its flexibility to be able to utilise cheaper gas feedstocks to improve margins. In early November the cogeneration unit at the Chocolate Bayou site was struck by lightening, which led to a disruption to the instrument air supply systems. The site tripped into shutdown mode, with a small fire resulting on the Olefins 2 unit and damage caused to some of the furnaces. This had a significant impact on the performance of the business in the quarter. The Olefins 1 unit was brought back on stream by the end of November and the Olefins 2 unit at reduced rates by the end of December.
Refining reported HC EBITDA of €46 million compared to €28 million in Q4, 2009. Inventory holding gains amounted to €82 million in the quarter compared to gains of €27 million in Q4, 2009. Refining reported RC EBITDA loss of €36 million compared to a profit of €1 million in Q4, 2009. Refining margins have remained weak in the quarter. The business was significantly impacted by the strike action in the Port of Marseilles, which led to the shutdown of the refinery for a period. There were also scheduled turnarounds of the FCC / VDU units in Lavera during the quarter. The operations of the Grangemouth refinery were also impacted by the severe weather conditions in the latter part of the quarter.
Total capital expenditure for 2010 was €344 million, of which €130 million was in the Refining business.
The Group has continued to focus on cash management and liquidity. Net debt was approximately €6.85 billion at the end of December 2010. Cash balances at the end of the quarter were €599 million, and availability under the Revolving Credit Facility was €266 million. The Group made a voluntary repayment of €200 million on the Senior Term Loans in December. Net debt leverage was approximately 4.4 times as at the end of December 2010.