Trading Statements

INVESTOR UPDATE

INEOS GROUP HOLDINGS S.A.

April 9, 2020

Investor Update

INEOS Group Holdings S.A. (‘INEOS’ or the ‘Group’) provides an update on its actions in response to the current COVID-19 virus pandemic.

Safety

Safety remains our number one priority.  We have introduced a range of practices to protect our employees from the virus, including increased hygiene measures, social distancing and the prevention of all unnecessary site visits.  All employees who can work from home are doing so.  The strong SHE culture within the Group has enabled us to implement stringent operational controls to maintain safe operations.  These measures have proved very effective and only a very small proportion of our workforce have contracted the virus to date. 

The chemical industry is deemed as essential, critical infrastructure by governments across the world, including the US and the EU.  We therefore intend to keep operating fully across all of our sites during the crisis. 

Our products are key to the production of essential healthcare products from rubber gloves to saline drips, syringes, ventilators, medical tubing and protective garments and screens.  We produce raw materials for hand sanitisers and other cleaning materials and for medicines such as aspirin and paracetamol, together with products being used in pharmaceutical analysis essential in the procedures necessary to find a vaccine and to test for the virus.

Business impact

We have seen very little impact on the supply side to date.  Our own measures to protect employees have so far proved very effective, and there have been no noticeable restrictions on raw material availability or production.

On the demand side, medical, food and cleaning applications are more than offsetting the automotive and construction downturn.  There has been a reduction in volumes for durables associated with the temporary closure of the automotive industry and the decline in construction activity.  In contrast, there has been a surge in demand for consumable products into packaging, medical applications, protective equipment, solvents and certain other materials.

The recent oil and energy price reductions are positive for the Group.  These reductions translate in to reduced variable costs of production and provide support for product margins.  Although the reductions in feedstock prices will result in a non-cash inventory holding loss, the reductions are beneficial for liquidity, as they result in a significant working capital release and positive cash flows.

Recent actions

The Group has implemented a number of measures to conserve cash during this uncertain period. As a pre-emptive measure to control fixed costs further, the Group has implemented a policy where all discretionary spend now needs to be approved at board level for each business.  In addition, all non-essential recruitment has also been halted.

The Group has reviewed all capital projects in each of the businesses and taken decisions to defer or reduce discretionary expenditure where it is safe to do so.  In addition, where possible planned site maintenance turnarounds have been delayed.  It is expected that this will lead to a reduction of approximately €300 million in planned capital expenditure in 2020.

Corporate tax payments are expected to be significantly lower in 2020.  Numerous governments have implemented measures to defer tax payments and the US has also allowed businesses to carry back tax losses to obtain tax refunds (under the new CARES Act).  We will be utilising all of these approved measures where applicable. 

Liquidity

The liquidity of the Group remains strong.  Cash balances at the end of the March 2020 were €1,025 million, and availability under undrawn working capital facilities was approximately €200 million.  The recent significant fall in raw material costs and lower investment in working capital, together with the swift actions taken by the Group on cash conservation will support further the Group’s positive cash flows.

Further updates

The Group’s Q1, 2020 Trading Statement will be issued on April 22, 2020 and the Q1, 2020 investor call will be held on April 28, 2020, where the Group will provide a further update.