Trading Statements

Trading Statement Q2, 2020

INEOS GROUP HOLDINGS S.A.

July 21, 2020

Q2, 2020 Trading Statement

INEOS Group Holdings S.A. (‘INEOS’ or the ‘Group’) announces its trading performance for the second quarter of 2020.

Based on unaudited management information INEOS reports that replacement cost EBITDA for the second quarter of 2020 was €320 million, compared to €532 million for Q2, 2019. The second quarter results were adversely impacted by non-cash inventory holding losses of approximately €60 million (Q2, 2019: €31 million) as a result of the large decline in crude oil and product prices at the start of the quarter. Historical cost EBITDA for the second quarter of 2020 was €260 million, compared to €501 million for Q2, 2019 and €365 million for Q1, 2020.

The current COVID-19 virus pandemic has severely impacted demand across all regions, as numerous countries entered lockdown. Nevertheless, demand for packaging, medical, food and cleaning applications has been strong, largely offsetting the automotive and construction downturn.  The chemical industry is deemed as essential, critical infrastructure by governments across the world.  All of the Group’s sites have continued to operate fully during the current crisis and supply chains have operated without significant disruption.  Q2, 2020 is expected to be the low point of the crisis, as countries across the world emerge from lockdown and gradually return to normal.  The automotive sector is still weak, but is now slowly improving, and there are encouraging signs from the construction sector.  Overall core market conditions for all of the businesses are now improving from the lows seen in the second quarter.

O&P North America reported EBITDA of €103 million compared to €189 million in Q2, 2019.  Ethylene markets generally remained long, with reduced margins in the quarter due to lower demand levels and decreased prices in the quarter.  Results were negatively impacted by a scheduled major turnaround of one of the Chocolate Bayou crackers for the entire quarter (approximate impact €40m).  Polymer demand was generally solid, but weak durable demand and increased supply adversely impacted margins for both polymers and the pipe business.

O&P Europe reported EBITDA of €45 million compared to €151 million in Q2, 2019. The business was significantly impacted by inventory holding losses in the quarter.  Demand in the ethylene market has remained stable in the quarter, although demand for butadiene was very weak as a result of the slowdown in the automotive sector. Margins were lower due to weak demand, particularly for butadiene and benzene, and reduced prices in the quarter.  Results were negatively impacted by a scheduled major turnaround of one of the Koln crackers for the entire quarter (approximate impact €25m). European polymer demand was relatively balanced with strong demand from the consumables sector, and margins were stable in the quarter.

Chemical Intermediates reported EBITDA of €112 million compared to €161 million in Q2, 2019.  Volumes in all of the businesses in the Chemical Intermediates segment were adversely impacted in the quarter by the pandemic.  The Oligomers business had particular strength in co-monomers supporting polyethylene for medical, film and packaging applications, but supply in to the automotive, drilling fluid and lubricant markets were weak.  Demand for the Oxide business was subdued. Volumes were relatively stable and margins in commodity products such as glycol benefitted from lower raw material pricing. The markets for the Nitriles business were solid, with middle of cycle margins in most regions over the quarter. Volumes were lower in the quarter due to the impact of the pandemic and the closure of the Seal Sands facility in December 2019. Volumes for the Phenol business were also impacted by the pandemic, but margins remained stable due to higher returns on acetone.

The Group has implemented a number of measures to conserve cash during this uncertain period. The Group has implemented policies to control all discretionary fixed costs and all non-essential recruitment has been halted.  The Group has reviewed all capital projects in each of the businesses and taken decisions to defer or reduce discretionary expenditure and scheduled turnarounds where it is safe to do so.  In addition, the Group has applied for corporate tax refunds and deferrals where available. 

The Group has continued to maintain its focus on cash management and liquidity.  Net debt was approximately €5.9 billion at the end of June 2020.  Cash balances at the end of the quarter were €927 million, and availability under undrawn working capital facilities was €125 million. Net debt leverage was approximately 3.3 times replacement cost EBITDA and 3.8 times historical cost EBITDA as at the end of June 2020.