INEOS Group Holdings S.A. (‘IGH’ or ‘INEOS’) provides an update on both its trading performance for the fourth quarter of 2011 and current market conditions in the early part of 2012.
Based on unaudited preliminary management information INEOS estimates that pro forma EBITDA for the fourth quarter of 2011 was €220 million, compared to €223 million for Q4, 2010. These results represent EBITDA for the Chemicals businesses only after the disposal of the Refining business in July 2011. Full year 2011 pro forma EBITDA for Chemicals was €1,744 million.
The results for the fourth quarter and full year 2011 include a pro forma adjustment of €30 million for the adverse impact in our O&P Europe business of delayed restarts following turnarounds at our Koln and Grangemouth crackers. In Grangemouth our gas cracker incurred significant feedstock and utilities losses due to operational difficulties with the feedstock supply and in Koln a poorly executed overhaul by our contractor resulted in major losses and subsequent issues at restart.
The trading environment in Q4, 2011 was challenging with global economic and political uncertainties impacting demand in a number of sectors. Businesses such as Nitriles and Phenol were directly impacted by the government imposed fiscal restraint in China which led to a decline in Asian demand and declining product prices.
Problems in the Eurozone countries affected O&P Europe with many buyers seeking to reduce stockholdings, leading to weakening demand and reduced operating rates. Trading conditions were better in North America and O&P NA margins remained above mid-cycle. Oxide and Oligomers also held up well in the quarter.
The Group has continued to focus on cash management and liquidity. Net debt was approximately €6.1 billion at the end of December 2011. Cash balances at the end of the quarter were €581 million and availability under the Revolving Credit Facility was €293 million. Net debt leverage was approximately 3.5 times as at the end of December 2011.
The trading environment at the start of 2012 has improved significantly in comparison to Q4, 2011. In North America, O&P NA margins have benefited from polyethylene prices increasing (for the first time in December since 1985), ethane prices significantly declining and from a tightening supply position caused by a heavy plant turnaround season in the industry. In O&P Europe all plants are running well after coming back from Q4 turnarounds and offtake has picked up after heavy destocking at the year end. Substantial sales price increases are being targeted for February. In Chemical Intermediates all four major businesses have encountered improved trading conditions: Phenol sales are 20% higher than December and Nitriles' plant operating rates have risen from around 60% in Q4 to 90% in January. Across the entire business the 4-week moving average of weekly order volumes in early January is the highest it has been over the last 5 years.
INEOS will be issuing a more detailed trading statement in February and this will be followed by a conference call with investors.