Trading Statement Q4 2020 - INEOS Quattro Holdings Limited
INEOS Quattro Holdings Limited (‘INEOS Quattro’ or the ‘Group’) announces its trading performance for the fourth quarter of 2020.
On December 29, 2020, INEOS Quattro acquired BP’s global Aromatics and Acetyls business for a consideration of $5 billion. On the same day, the Styrolution and INOVYN businesses were brought under a common umbrella organisation, INEOS Quattro Holdings Limited. The group is presenting its Q4, 2020 results on a proforma basis to reflect the businesses acquired from BP.
Based on unaudited management information, INEOS Quattro reports that proforma HC EBITDA for the fourth quarter of 2020 was €447 million, compared to €322 million for Q4, 2019 and €383 million for Q3, 2020. Full year HC EBITDA was €1,421 million, compared to €1,803 million for 2019. Adjusting for non-cash inventory holding losses, EBITDA for the fourth quarter of 2020 on a replacement cost (RC) basis was €404 million, compared to €339 million for Q4, 2019 and on a full year basis, RC EBITDA was €1,568 million compared to €1,864 million in 2019.
The chemical industry is deemed as essential, critical infrastructure by governments across the world. All of the Group’s main sites have continued to operate fully during the current COVID-19 virus pandemic and supply chains have operated without significant disruption. The second quarter of 2020 was the low point of the current crisis. Since then countries across the world have opened up their economies after lockdown and market conditions have gradually improved during the third quarter. The automotive and durables sectors are still weak, but are now slowly improving, and there are encouraging signs from the construction sector. Market conditions for all of the businesses are now improving from the lows seen in the second quarter.
Styrolution reported EBITDA of €238 million compared to €124 million in Q4, 2019. The fourth quarter performance was strong because markets were tight, a result of good demand. EBITDA improved in all our product groups and was considerably higher than the seasonal average. The key drivers were the top of cycle polymer trading conditions in Asia, helped by strong export demand out of China from the Electronics and Household industry. Compared to previous quarters, the sales of durable products improved in our focus industries. The increase in downstream polymer demand strengthened our styrene performance as demand and margins improved. The fourth quarter results were positively impacted by non-cash inventory holding gains of approximately €29 million as a result of an increase in crude oil and product prices compared to a loss of €21 million in Q4, 2019. The RC EBITDA for the fourth quarter of 2020 was €209 million compared to €144 million for Q4, 2019.
INOVYN reported EBITDA of €167 million compared to €135 million in Q4, 2019. The strong fourth quarter performance was the result of records levels of general purpose PVC spreads over ethylene, whilst total volumes of general purpose PVC sold were at similar levels to Q4, 2019. Global general purpose PVC markets were particularly tight in Q4, 2020 due to a combination of strong demand, which was considerably higher than the seasonal average, and supply side tightness caused by low stock levels and several planned and unplanned disruptions in Europe and the US. Sales prices increased significantly to very high levels in domestic and particularly export markets, whereas European ethylene contract prices averaged €782 per tonne for Q4, 2020, compared to €973 per tonne in Q4, 2019. The European contract price for caustic soda was €59 per tonne lower than Q4, 2019. Domestic caustic soda margins were lower than Q4, 2019.
Acetyls reported EBITDA of €22 million compared to €33 million in Q4, 2019. The quarter on quarter EBITDA reduction was impacted by one off events, including an insurance receipt of €5 million in 2019 in the US for the settlement of a business interruption claim from Q2, 2018, and a turnaround event at our Atlas joint venture in 2020 (EBITDA in Q4 2019 of €6 million) reduced to €2 million in Q4 2020). In 2020, lower Q4 margins in Europe and the US were driven by continued COVID 19 impacts on demand and subsequent industry utilisation rates. However, this was partially offset by stronger Q4 2020 margins in our Asian JVs as a result of improving industry supply and demand dynamics, which materialised in November and December.
Aromatics reported EBITDA of €20 million compared to €30 million in Q4, 2019. Quarter 4 2020 saw a strong volume recovery in PTA sales, particularly in the US, with total PTA sales higher than in Q4 2019 despite a planned turnaround event at the Zhuhai site. Long PX and PTA supply in the market pushed margins to bottom of cycle conditions which resulted in Q4 2020 margins being lower than 2019. Rising prices in Q4, 2020 generated inventory holdings gains of €9 million in the quarter compared to €2 million in Q4, 2019.
On closing of the BP acquisition, the Group drew $350 million under a Dollar Term Loan A Facility, €300 million under a Euro Term Loan A Facility, $2,450 million and €870 million under a Bridge Facility and used this to pay the purchase price for the BP acquisition.
The Group completed a refinancing project on January 29, 2020 whereby USD senior secured notes of $500 million, EUR senior secured notes of €800 million and Senior Notes of €500 million were issued. In addition Term Loan B borrowings of $2,000 million and €1,500 million were also issued. The proceeds of the refinancing and cash on hand were used to repay the Bridge Facility, INOVYN’s Term Loan B borrowings, €180 million of the Term Loan A borrowings and to discharge the deferred consideration liability to BP.
Cash balances (as adjusted for the bridge repayment, the net proceeds from the January refinancing and cash used to discharge the $1,000 million BP deferred consideration) at the end of the fourth quarter of 2020 were €563 million, and availability under undrawn securitization facilities and the RCF was €934 million.
Proforma for the refinancing, net debt at the end of the year was €6,228 million. Based on full year proforma RC EBITDA of €1,568 million, net leverage was 4.0x and was 4.4x based on proforma HC EBITDA of €1,421 million.