INVESTORS want a safe pair of hands. But that doesn’t mean always playing it safe, as Peter Clarkson, head of investor relations at INEOS, is keen to point out
INVESTORS have grown to love INEOS as the company itself has grown over the past 17 years.
On the face of it, it’s understandable. It has risen from humble beginnings in 1998, when it employed 400 people and turned over £200 million, to become a company employing 17,000 people across 67 sites in 17 countries with global sales of a cool $40 billion.
“To our investors we have become a ‘must have’ investment,” said Peter Clarkson, Head of Investor Relations at INEOS. “INEOS bonds can be found in the portfolios of most managed funds because it has continued to provide investors with an excellent return, and consistently meets and exceeds its promises time after time.”
But to really understand why the appetite to share in INEOS’ success is growing, you have to look beyond the balance sheet, impressive though it is.
For what INEOS has become an expert at is turning unwanted, inefficient businesses back to profit where others have simply failed.
And that is down to the way the company is run.
“Many of the old blue-chip companies manage by committee, but that doesn’t happen in INEOS,” said Peter. “People, even new graduate employees, are given clear individual responsibility, and report to a very focused business board, who can make major decisions very quickly.”
INEOS actively encourages its staff to think like owners and spend money as if it were their own.
“INEOS is different,” said Peter. “The underlying mood is always restless. INEOS is always looking for opportunities and that is good news for anyone wanting to invest.”
As a company, INEOS thinks big. It dreams the impossible. But, more importantly, it makes things happen.
At this year’s annual investor days in London and New York, Peter detailed some of the initiatives – big and small – that continued to give INEOS its well-deserved reputation as a company that was comfortable taking calculated risks.
He talked about INEOS’ ground-breaking decision to buy 12 North Sea gas fields for £490 million while all around seem to be selling up.
He spoke about the incredible ships, which are now bringing low-cost ethane from America to Norway – and soon Scotland – to give INEOS’ European gas crackers the edge over its competitors.
“We are very comfortable with where we are, but there is much more we can do,” he said.
The investors – and there were almost 200 at this year’s investor days – are keen to hear INEOS’ views of the market, its predictions for the price of oil, and in particular naphtha, which it uses to feed some of its crackers, the impact of low-cost US shale gas and what major projects are planned.
“They usually want to know about anything and everything that has a major influence on our cash flow,” said Peter.
What investors have discovered is that a year in the life of INEOS is never dull.
For INEOS Group, INEOS Styrolution and INOVYN, 2015 proved to be a record year thanks to favourable markets due, in part, to the failure of its competitors.
INEOS capitalised on that by running its plants hard, maximising the high margin business that was to be had.
“Everyone knows that the global petrochemical industry’s assets are ageing and becoming increasingly unreliable and expensive to maintain,” said Peter. “But we are good at maintaining our assets in a safe and reliable condition, whilst controlling capital expenditure. The reliability factor has really paid dividends over the past couple of years.”
INEOS’ cracker in Koln, Germany, for instance, is 99% reliable despite its age.
“It is like a well-cared for Mercedes with 100,000km on the clock,” said Peter.
When money is spent, it is spent wisely on projects that will make money for INEOS to invest elsewhere.
“The projects are always well targeted and cost-effective,” said Peter. “Even the smaller projects add value.”
INEOS has worked hard to ensure investors are treated as part of the team. Every week all investors and analysts are sent a market update with a summary of what has been happening in all of INEOS’ major markets.
“It is very unusual in the world they invest in but we believe they value that transparency,” said Peter. “It also helps to reduce the amount of time needed to renegotiate and secure better interest rates when we launch new bonds. Investors often feel they don’t need to attend an investor day because they understand the company so well.”
That openness means a bond refinancing deal can now be done in days instead of weeks.
“We have absolutely no trouble selling our debt because of our reputation,” said Peter.