Q3, 2010 Trading Statement
INEOS Group Holdings PLC (‘IGH’ or ‘INEOS’) confirms a continuation of good conditions for Chemicals in the third quarter of 2010, although the environment for Refining remains difficult.
Based on management information INEOS reports that Historical Cost EBITDA (‘HC EBITDA’) for the third quarter of 2010 was €402 million, compared to €376 million for Q3, 2009 and €478 million for Q2, 2010. Refining inventory holding losses amounted to €4 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 €406 million for the quarter, compared to €325 million for Q3, 2009 and €496 million for Q2, 2010. YTD September 2010 RC/HC EBITDA was €1,376 million compared to €718 million for the same period last year. The Group now uses RC/HC EBITDA to measure its compliance with the financial covenants under its senior banking facility.
Chemical Intermediates reported HC EBITDA of €251 million compared to €187 million in Q3, 2009. Demand for chemical intermediates has continued to be strong across all sectors and all regions. The market for acrylonitrile has been very tight and high margins have been maintained. One of the lines in Cologne had a scheduled turnaround in the quarter. The global market for phenol has remained tight with healthy margins as a result. 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 €95 million compared to €65 million in Q3, 2009. The results for the quarter were impacted by some production issues, with a scheduled turnaround of the KG cracker and an unscheduled turnaround of the G4 cracker, both in Grangemouth and an unscheduled outage of the polypropylene unit in Lavera. Demand for olefins continued to be strong, resulting in high margins in the quarter, particularly in butadiene. Polymer demand also remained firm across all products, resulting in strong margins in the quarter.
O&P North America reported HC EBITDA of €119 million compared to €105 million in Q3, 2009. The business has continued to benefit from its flexibility to be able to utilise cheaper gas feedstocks to improve margins. There were scheduled turnarounds of polypropylene units at the Carson and Chocolate Bayou sites in the quarter. The market has continued to be tight with improving domestic demand. Demand for polypropylene continues to be strong and domestic demand for polyethylene continues to recover especially in the automotive, injection moulding and speciality packaging sectors.
Refining reported RC EBITDA loss of €59 million compared to a loss of €32 million in Q3, 2009. Inventory holding losses amounted to €4 million in the quarter compared to gains of €51 million in Q3, 2009. Refining margins have remained weak in the quarter. Margins were impacted with supply in excess of demand as a number of refineries returned from planned turnarounds in the period. There was a scheduled turnaround of the catalytic reformer unit in Grangemouth during the quarter, which also limited the refinery’s hydrocracker operating rates.
The Group has continued to focus on cash management and liquidity. Net debt was approximately €7.0 billion at the end of September 2010. Cash balances at the end of the quarter were €547 million. The Group has repaid €250 million on the Revolving Credit Facility during the quarter. Net debt leverage was approximately 4.3 times as at the end of September 2010.
The Group completed the disposal of the Films business to Bilcare in August 2010. Disposal proceeds of €96 million were received in the third quarter.